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TEACHERS  MANUAL 

TO  ACCOMPANY 

ACCOUNTING  AND  BUSINESS 
PRACTICE 


MOORE  AND  MINER 


SB    SflD    bSO 


GINN   AND   COMPANY 


GIFT  OF 


TEACHER'S    MANUAL 

A  HANDBOOK  FOR  TEACHERS 
PREPARED  FOR  USE  WITH 

ACCOUNTING  AND  BUSINESS 
PEACTICE 


BY 

JOHN  H.  MOOEE 

l\ 

COMMERCIAL  DEPARTMENT,  BOSTON  HIGH  SCHOOLS 
AND 

GEOEGE  W.  MINER 

4 

COMMERCIAL  DEPARTMENT,  WESTFIELD  (MASS.)  HIGH  SCHOOL 


BOSTON,  U.S.A. 

GINN  &  COMPANY,  PUBLISHERS 
C&e  athenaeum 
1903 


PREFACE 

THIS  manual  is  intended  to  aid  the  teacher  in  deciding  upon 
a  plan  to  be  adopted  by  him  in  conducting  his  classes,  and  to 
furnish  such  supplementary  exercises  as  may  suggest  a  series  of 
valuable  review  topics  for  special  class  drills  and  occasional  dis- 
cussions. All  the  work  given  is  of  a  suggestive  nature,  and  is 
not  intended  to  be  in  conflict  with  any  particular  metHod  of  any 
teacher.  For  convenience,  the  matter  furnished  is  divided  into 
exercises,  but  these  exercises  will  be  found  to  be  susceptible  of 
such  modifications  as  the  teacher  may  see  fit  to  make. 


COPYRIGHT,  1903 
BY  GINN  &  COMPANY 


ALL  EIGHTS  RESERVED 


SUGGESTIONS   FOE    USING   "ACCOUNTING   AND 
BUSINESS   PRACTICE" 

Familiarity  with  the  Text.  —  It  is  very  desirable  that  the  teacher 
who  uses  Accounting  and  Business  Practice  should  familiarize 
himself  with  the  plan  and  scope  of  the  work.  As  far  as  possible 
he  should  have  all  the  details  which  he  will  expect  the  student  to 
carry  out  well  in  mind.  If  he  has  the  time  to  write  up  the  work 
in  advance  of  his  pupils,  so  much  the  better;  but  if  he  has  a 
thorough  knowledge  of  bookkeeping,  this  will  not  be  absolutely 
necessary,  as  the  text  itself  gives  clear  and  definite  instructions 
with  regard  to  the  manner  of  making  all  records,  etc. 

The  design  of  the  text  is  to  acquaint  the  student  with  modern 
business  forms  and  documents,  and  by  a  variety  of  transactions 
to  illustrate  approved  methods  of  doing  business  and  recording 
business  transactions.  The  work  will  be  found  to  be  well  graded. 
In  the  introductory  sets  the  transactions  have  all  been  made  as 
simple  as  is  consistent  with  good  business  practice.  In  the  inter- 
mediate portion  of  the  work  new  and  more  difficult  transactions 
are  introduced.  The  invoicing,  the  bank  work,  and  cash-book 
work  are  made  especially  heavy  in  order  that  the  most  approved 
methods  of  large  business  establishments  may  be  illustrated,  and 
that  the  qualities  of  accuracy,  rapidity,  punctuality,  and  self- 
reliance  may  be  cultivated.  In  the  advanced  portion  of  the  work 
the  single  entry  method  is  explained,  and  accounting  as  .applied 
to  corporations,  manufacturing  establishments,  banking  institu- 
tions, etc.,  is  illustrated. 

General  Methods.  —  In  all  the  duties  performed,  the  teacher 
should  accept  nothing  but  a  high  grade  of  work.  He  should  see 
to  it  that  the  students  are,  first  of  all,  provided  with  proper 
materials.  A  good  supply  of  red  and  black  ink  should  be 

iii 

285382 


iv  TEACHER'S  MANUAL 

available  for  every  student ;  two  good  penholders  should  always 
be  in  readiness  for  immediate  use,  one  of  which  should  always 
be  used  for  black  ink,  and  the  other  for  red  ink.  Good  pens 
should  be  liberally  supplied,  and  the  student  should  never  be 
allowed  to  write  with  poor  ones.  Good  mechanical  work  can- 
not be  accomplished  without  a  good  ruler.  This  should  be  at 
least  fifteen  inches  long  and  not  less  than  a  quarter  of  an  inch 
in  thickness,  with  a  bevel  edge.  A  good  clean  blotter  should 
always  be  at  hand  to  keep  the  pages  of  the  book  from  becom- 
ing soiled.  No  student  should  be  allowed  to  do  any  work  upon 
the  blank  books  until  he  is  able  to  do  the  work  neatly  and 
accurately.  Loose  sheets  should  be  used  until  he  has  formed 
some  of  the  essential  habits  of  high-grade  accounting.  From 
the  outset  the  teacher  should  insist  upon  good,  legible  figures 
and  some  uniformity  in  the  size  and  proportions  of  the  capitals, 
small  letters,  etc. 

Different  Adaptations  of  the  Work.  —  Accounting  and  Business 
Practice  is  unique  among  bookkeeping  systems  in  that  it  readily 
adapts  itself  to  the  requirements  of  classes  and  schools  of  all 
kinds. 

First.  It  may  be  used  for  a  mere  theoretical  presentation  of 
the  subject  of  accounting,  in  which  case  only  the  text-book  and 
blank  books  should  be  used. 

Second.  It  may  be  used  in  the  presentation  of  the  modified 
system  of  business  practice,  in  which  case  the  text-book,  blank 
books,  and  blank  business  forms  should  be  used. 

Third.  It  may  be  used  in  the  presentation  of  the  complete 
system  of  business  practice,  in  which  case  the  text-book,  blank 
books,  blank  business  forms,  and  representative  money  should  be 
used  in  connection  with  well-organized  school  offices. 

Fourth.  The  work  is  so  divided  that  the  teacher  may  use  a 
portion  of  the  text  for  a  theoretical  presentation  of  the  subject, 
a  portion  for  some  modified  system  of  business  practice,  and  a 
portion  of  the  work  for  some  complete  system  of  business  prac- 
tice. Every  teacher  of  originality  has  ideas  of  his  own,  and  the 
text-book  is  designed  to  furnish  memoranda  that  may  be  used  by 
him  to  accomplish  his  ends  in  any  particular  direction. 


SUGGESTIONS  V 

Theory.  —  Some  teachers  may  prefer  to  present  only  the  theo- 
retical side  of  accounting  in  the  schoolroom.  Accounting  and 
Business  Practice  is  well  adapted  for  such  a  course  of  study.  It 
is  complete  in  itself,  not  being  dependent  upon  outside  vouchers, 
and  gives  sufficient  material  for  showing  the  book  records  of  the 
smallest  business  houses  up  to  the  complex  records  of  wholesale 
jobbing,  manufacturing,  and  corporation  accounting.  If  the 
book  is  used  merely  for  the  presentation  of  the  theoretical  side 
of  accounting,  the  business  forms  outlined  for  Sets  III  to  VII, 
inclusive,  may  be  omitted  and  referred  to  only  as  the  memoranda 
requires  it  in  the  course  of  recording  the  various  transactions. 
The  authors  do  not  advise  the  purely  theoretical  use  of  the  text- 
book, but  they  are  mindful  of  the  fact  that  the  conditions  govern- 
ing some  schools  are  such  as  to  make  it  impractical  to  try  to 
carry  on  a  satisfactory  system  of  business  practice.  In  this  con- 
nection might  be  mentioned  night  schools  and  other  schools  with 
similar  equipment  and  governing  conditions.1 

Modified  System  of  Business  Practice.  —  Sets  III  to  VII,  inclu- 
sive, of  the  text  are  arranged  for  a  system  of  business  prac- 
tice. In  schools  where  there  is  no  good  office  equipment  this 
is  the  plan  of  business  practice  which,  in  the  majority  of  cases, 
should  be  carried  out.  The  text-book  is  so  arranged  that  the 
modified  system  may  be  conducted  with  very  little  effort  on  the 
part  of  the  teacher  and  with  the  most  satisfactory  results  to 
the  student. 

Any  school  can  make  provision  for  a  modified  system  of  business 
practice.  All  that  is  necessary  is  to  arrange  a  desk  or  table  with 
convenient  drawers  or  compartments  for  filing  vouchers  and  other 
material,  for  keeping  representative  money,  etc.  The  students 
may  be  required  to  take  turns  at  serving  at  this  desk.  Generally 
speaking,  it  would  be  well  to  have  a  student  remain  in  charge  of 
the  desk  for  at  least  one  week  at  a  time.  In  this  way,  out  of  a 

1  In  the  intermediate  portion  of  the  work,  where  any  set  is  used  for 
theory  only,  the  teacher  should  get  a  supply  of  invoice  blanks  for  use 
in  the  invoice  book.  Sixteen  invoices  are  required  per  student  for  each 
of  the  three  intermediate  sets.  These  invoices  may  be  obtained  of  the 
publishers. 


vi  TEACHER'S  MANUAL 

class  of  twenty-five  no  one  need  be  called  upon  to  serve  oftener 
than  once  in  every  three  or  four  months.  At  this  desk  let  all 
the  deposits  be  made,  and  require  the  student  in  charge  to  enter 
them  in  the  pass  books.  Here,  also,  receipts  and  payments  of 
money  should  be  made,  bills  of  lading,  etc.,  signed.  No  books 
of  record  need  be  kept,  the  students  simply  going  to  the  desk  for 
the  performance  of  such  transactions  as  require  a  second  party, 
f  If  it  is  found  that  one  student  cannot  take  care  of  the  work  of 
the  class,  two,  or  even  more,  may  be  selected  to  have  charge  of 
such  work.  If  more  than  one  student  is  selected  the  work  should 
be  so  classified  that  each  has  a  particular  office  to  perform.  For 
instance,  one  may  be  delegated  to  take  care  of  the  bank  work, 
receive  deposits,  accept  notes  for  discount,  make  proper  entries  in 
the  passbooks,  balance  the  pass  books,  verify  bank  accounts,  etc. 
Another  may  be  appointed  to  look  after  all  receipts  and  pay- 
ments of  cash  on  account,  to  keep  under  proper  lock  and  key  the 
representative  money  of  the  school,  to  sign  freight  receipts  and 
such  other  papers  as  require  the  signature  of  a  second  party, 
verify  amounts  on  invoices,  etc."  If  the  class  is  small  the  teacher 
may  find  time  to  look  after  all  this  work  himself,  in  which  case 
he  should  have  some  definite  place  for  the  placing  of  deposits, 
checks,  and  all  materials  relating  to  the  bank  work,  so  that  there 
will  be  no  delay  in  transacting  such  business  as  may  require  the 
services  of  a  second  party. 

If  students  are  placed  in  charge  of  the  desk  work  all  papers, 
etc.,  should  first  be  passed  upon  by  the  teacher.  The  student  in 
charge  of  the  desk  work  should  receive  no  papers  that  do  not 
bear  the  O.K.  stamp  of  the  teacher.  The  students,  in  doing 
business  with  the  one  in  charge  of  the  desk,  should  first  present 
their  work  to  their  teacher  for  approval.  He  should  examine 
every  document  as  to  its  accuracy,  mechanical  arrangement,  etc., 
and  by  some  sort  of  stamp  provided  for  that  purpose  mark  the 
work  in  such  a  way  that  the  students  who  are  assisting  him  may 
readily  see  that  the  papers  have  his  approval  before  they  accept 
them.  A  system  of  office  practice  that  is  ideal  in  every  particular 
may  be  developed  along  this  line  by  high  schools  with  no  office 
equipment.  Of  course,  where  there  is  office  equipment  the  desk 


SUGGESTIONS  vii 

plan  should  be  abandoned,  and  the  student  or  students  put  in  the 
offices  to  handle  the  work  just  explained. 

The  text-book  outlines  a  plan  for  preparing  the  incoming 
vouchers  for  use  in  connection  with  the  various  transactions. 
After  long  experience  in  the  schoolroom,  the  authors  have  decided 
that  this  is  the  most  satisfactory  way  of  having  vouchers  reach  the 
student,  as  they  come  into  his  possession  for  use  complete  in 
every  detail,  —  place,  date,  etc.  In  other  words,  they  are  in  just 
the  form  that  he  would  handle  them  in  actual  business. 

When  the  vouchers  are  being  prepared  they  may  be  written  up 
as  an  exercise  on  business  forms.  Here  is  where  the  teacher 
should  give  emphasis  to  some  of  the  important  things  relative  to 
checks,  notes,  drafts,  invoices,  etc.  He  should  see  that  every 
paper  is  made  out  correctly  in  every  detail.  The  accuracy  of 
amounts,  etc.,  may  be  verified  by  one  of  the  students  in  charge 
of  the  office  work.  The  teacher,  of  course,  should  have  an  eye  on 
all  this  checking,  and  should  hold  some  one  responsible  for  any 
error  which  may  be  overlooked.  An  examination  of  business 
forms  with  a  critical  eye  will  be  found  of  help  to  the  student. 
Of  course,  do  not  keep  any  one  student  too  long  a  time  at  such 
work.  Assign  work  of  this  kind  to  a  particular  student  for  a 
definite  time. 

Before  the  forms  are  filed  away  in  the  envelope  for  incoming 
vouchers,  they  should  bear  the  O.K.  stamp  of  the  teacher.  The 
envelope  of  incoming  vouchers  may  be  kept  by  each  student 
or  by  those  in  charge  of  the  desk  or  office  practice.  On  .the 
whole,  it  is  considered  best  to  let  each  student  have  charge  of 
his  envelope  of  incoming  papers  after  it  has  been  approved  by 
the  teacher.  The  teacher  may  make  such  provision  for  the  out- 
going papers  as  he  sees  fit.  All  outgoing  papers  should  bear  his 
stamp  before  they  are  filed  away  anywhere.  In  the  majority  of 
cases  it  will  be  found  best  to  provide  each  student  with  an  envel- 
ope of  legal  size,  and  instruct  him  to  place  in  this  all  outgoing 
papers  after  they  have  been  properly  O.K.'d.  If  the  teacher 
thinks  best  he  may  require  that  all  outgoing  papers  in  the  nature 
of  checks,  etc.,  may  be  put  in  a  separate  envelope  for  readiness  in 
writing  up  the  pass  books  at  the  close  of  any  definite  period. 


viii  TEACHER'S  MANUAL 

The  pass  books  should  be  carefully  written  up  at  the  points 
specified  in  the  text-book.  In  this  way  an  accurate  check  may 
be  had  upon  the  bank  work  of  each  student. 

Some  teachers  will  find  it  advisable  to  have  all  the  students,  or 
at  least  some  particular  students,  first  write  up  the  introductory 
sets  of  business  practice  by  merely  recording  the  transactions  on 
loose  paper  in  the  various  books  of  record ;  then  collect  the  loose 
papers  and  have  them  start  over  again  with  a  different  price  list, 
using  all  the  business  forms,  writing  the  transactions  in  the  blank 
books,  and  carrying  on  the  modified  system  of  business  practice. 
This  method  will  be  found  helpful  in  emphasizing  some  of  the 
fundamental  principles  of  accounting. 

Complete  System  of  Business  Practice.  —  If  schools  have  the 
necessary  office  equipment  they  should  conduct  at  least  a  portion 
of  the  work  in  such  a  way  that  the  students  may  have  the  advan- 
tages of  a  complete  system  of  business  practice.  Such  offices  may 
be  organized  as  the  teacher  deems  advisable.  In  the  majority  of 
cases  the  following  offices  would  be  found  adequate :  (1)  School 
Bank ;  (2)  School  Emporium ;  (3)  School  Exchange. 

School  Bank.  —  This  is  the  most  important  of  the  three  offices 
required.  Some  simple  system  of  bank  accounting  should  be 
provided  for  this  office.  The  only  book  which  is  absolutely 
necessary  for  the  simplest  kind  of  bank  work  is  the  individual 
ledger.  For  this  work  the  ordinary  form  of  ledger  may  be  used. 
If  such  a  ledger  is  employed,  credit  each  student  for  his  deposits, 
including  the  proceeds  of  notes  discounted  and  the  collection  of 
drafts,  etc.,  made  in  his  favor.  Debit  him  with  his  own  checks 
and  with  all  paper  charged  to  his  account  at  the  bank.  It  will 
not  consume  very  much  time  to  keep  records  of  this  kind,  and 
any  student  of  average  ability  will  be  found  capable  of  conducting 
the  work  satisfactorily  and  with  benefit  to  himself.  If  a  com- 
plete office  system  can  be  organized,  the  regular  bank  books  of 
record  —  journal,  cash  book,  general  ledger,  deposit  ledger,  dis- 
count register,  collection  register,  discount  tickler,  draft  register, 
and  collection  tickler  —  may  be  used ;  and  the  teacher  should 
select  whatever  books  and  form  whatever  plans  his  judgment 
may  dictate. 


SUGGESTIONS  ix 

School  Emporium.  —  At  this  office  all  merchandise  should  be 
bought.  Some  system  of  accounting  should  be  adopted  that  will 
meet  the  views  and  requirements  of  the  teacher.  Generally  a 
journal,  sales  book,  bill  book,  check  book,  and  ledger  may  be  used 
to  advantage.  The  system  adopted  should  be  suited  to  the 
convenience  of  the  teacher  and  school. 

School  Exchange.  —  This  office  is  next  in  importance  to  the 
school  bank.  Here  all  business  which  may  not  properly  belong 
to  the  school  bank  or  school  emporium  should  be  transacted. 
The  sphere  of  the  office  should  be  to  act  as  a  sort  of  middleman 
between  the  pupil  and  all  second  parties  other  than  the  school 
emporium  and  school  bank. 

At  the  close  of  each  day's  work  the  school  bank  and  school 
exchange  should  exchange  statements.  A  list  of  all  checks  and 
other  cash  paper  which  have  been  received  during  the  day  from 
customers  should  be  made  and  the  proper  exchanges  effected. 
This  may.be  done  by  a  check  issued  by  the  office  against  whom 
the  excess  of  difference  chances  to  fall. 

The  system  of  accounting  to  be  adopted  for  the  school  exchange 
will  depend  altogether  upon  the  scope  and  plan  of  the  office  system 
organized  by  the  teacher. 

In  order  to  sell  New  York  drafts  it  will  be  necessary  to  provide 
some  sort  of  New  York  correspondent  for  the  school  bank.  The 
school  exchange  may  represent  such  a  correspondent.  All  drafts 
issued  may  be  redeemed  at  the  school  exchange  in  practically  the 
same  manner  as  the  paper  of  other  fictitious  parties. 

Office  Assistants.  —  If  the  complete  office  system  is  adopted, 
there  should  be  in  charge  of  the  office  at  all  times  competent 
assistants.  This  work  may  be  delegated  to  the  members  of  any 
of  the  advanced  classes ;  make  it  a  part  of  their  regular  course 
and  require  of  them  definite  results.  For  the  complete  office 
system  the  students'  incoming  vouchers  should  be  retained  by 
those  in  charge  of  the  offices  and  given  out  to  the  individual 
students  as  they  are  required.  If  the  teacher  deems  it  advis- 
able, these  incoming  papers  may  be  prepared  by  those  in  charge 
of  the  offices.  With  large  classes  this  may  not  be  possible,  and 
it  is  hardly  necessary  to  the  efficiency  of  the  work  done.  The 


X  TEACHER'S  MANUAL 

individual  students  may  be  made  to  prepare  the  Hst  of  incoming 
vouchers  as  a  drill  on  business  forms.  After  such  forms  have 
been  O.K.'d  by  the  teacher  and  filed  in  the  proper  envelope  by 
the  student,  they  may  be  handed  to  those  in  charge  of  the  offices, 
properly  classified  by  them,  and  delivered  to  the  students  as  the 
transactions  progress.  Where  sufficient  time  can  be  devoted  to 
the  study  of  bookkeeping  this  course  of  study  will  be  found 
ideal  to  both  teacher  and  student.  The  plans  laid  down  for 
conducting  the  work,  however,  are  merely  suggestive  of  what 
may  be  undertaken  with  profit.  The  teacher  should  make  such 
adaptations  as  governing  conditions  may  dictate  and  suggest. 


TEACHER'S    MANUAL 

EXERCISE  I 

ELEMENTARY  JOURNALIZING 

DIRECTIONS.  —  Journalize  the  following  items,  using  the  month  of 
January.  Post,  make  a  trial  balance  and  balance  sheet,  resource  and 
liability  statement,  loss  and  gain  statement,  and  close  the  loss  and  gain 
accounts. 

1.  Begin  business  this  day  investing  cash,  $2500. 

3.  Buy  for  cash  of  E.  Brown,  100  bbls.  flour  at  $6. 

5.  Sell  J.  Strong  on  account,  one  month,  25  bbls.  flour  at 
$8.25. 

7.  Sell  S.  Conn  for  cash,  50  bbls.  flour  at  $8. 

9.  Receive  cash  of  J.  Strong,  to  apply  on  account,  $100. 

12.  Buy  of  H.  Fenton  on  account,  200  bbls.  flour  at  $6.20. 

14.  Pay  one  month's  rent  of  store  in  cash,  $25. 

15.  Withdraw  $1 00  from  the  business  for  personal  use,  by  check. 
17.  Sell  J.  Yernon  on  account,  50  bbls.  flour  at  $7.80. 

20.  Pay  H.  Fenton,  to  apply  on  account,  $1000,  by  check. 

21.  Sell  H.  Jones  40  bbls.  flour  at  $7.50,  receiving  cash  for 
one-half  the  amount  and  the  balance  on  account. 

23.  Buy  of  A.  Barnes  20  bbls.  flour  at  $6.25,  paying  cash  for 
one-half  and  the  balance  on  account. 

25.    Receive  J.  Vernon's  check  for  $200,  to  apply  on  invoice. 

27.  H.  Jones  gives  you  his  note  at  10  days,  for  the  balance  due 
on  invoice  of  the  21st. 

29.  Give  A.  Barnes  your  note  at  20  days,  for  the  balance  due 
on  invoice  of  the  23d. 

31.    Pay  clerk  hire  in  cash,  $22.50. 

1 


2  TEACHER'S  MANUAL 

The  teacher  will  supply  the  merchandise  inventory,  giving  dif- 
ferent amounts  to  different  students,  so  that  some  results  will 
show  a  loss  and  others  a  gain. 

Have  the  student  act  as  proprietor. 

The  foregoing  may  be  used  as  a  test  in  elementary  work. 


EXERCISE  II 

OPENING  ENTRIES  FOR  AN  INDIVIDUAL  PROPRIETOR 

SUGGESTIONS.  — A  variety  of  opening  entries  are  given  herewith.  It 
is  suggested  that  the  student  be  required  first  to  put  all  in  the  form 
of  a  journal  entry,  and  then  to  use  the  cash  book  as  well  as  the  jour- 
nal. If  it  is  thought  desirable  these  entries  may  be  posted,  and  thus 
complete  the  opening  of  a  set  of  books  on  beginning  business.  Where 
both  resources  and  liabilities  are  given  a  statement  should  be  made. 

1.  You  begin  business  with  the  following  investment :  cash, 
$3265;  real  estate,  store  and  lot,  $4318. 

2.  You*  begin  business  with  the  following  resources  and  lia- 
bilities :  cash  on  deposit,  $3000  ;  H.  M.  Fowler  owes  you  $1600 ; 
you  owe  James  Todd  $450  ;    Geo.  Farley's  note,  in  your  favor 
for  $725;  your  note,  in  favor  of  Jesse  Main  for  $,628  ;  interest 
accrued,  $28.45 ;  your  note,  in  favor  of  Willis  Hopkins,  $200. 

What  is  your  net  investment  ? 

After  a  statement  has  been  made  analyze  each  item. 

3.  Hiram  Follett  begins  business  with  the  following  resources 
and  liabilities :    cash,  $1500  ;    note  of   E.  Judson,   in   favor   of 
Follett,  $350  ;  interest  accrued  on  Judsori's  note,  $3.18  ;  J.  Lilley 
owes  on  account,  $325  ;  Leslie  Potter  owes  on  account,  $275 ;  his 
note,  in  favor  of  Anson  &  Peck,  $1000  ;  interest  accrued  on  the 
Anson  &  Peck  note,  $15.30  ;  real  estate,  $3200. 

What  is  the  net  investment  ? 

4.  Geo.  MacDonald  begins  business  under  the  following  condi- 
tions :  having  no  capital  of  his  own  he  borrows  $5000,  giving  his 
note  with  security. 

What  would  be  his  opening  entry  ? 


ELEMENTARY  JOURNALIZING  3 

Would  there  be  a  proprietor's  account? 

How  would  the  gains  of  the  business  be  disposed  of  ? 

5.  Wesley  Harris  begins  business  with  the  following  resources 
and  liabilities  :  cash  on  hand,  $495.50  ;  cash  on  deposit,  $1845.67; 
his  note,  in  favor  of  James  Oatley,  $500  (this  note  has  yet  60  days 
to  run  and  is  without  interest,  therefore  discount  is  allowed  for 
the  60  days)  ;  H.  Turner's  note,  in  favor  of  Harris,  $675  (69  days' 
interest  has  accrued  on  Turner's  note)  ;  he  owes  J.  Bruner  $213  ; 
merchandise  on  hand,  $2235  ;  H.  Willis  owes  Harris  $375. 

What  is  the  opening  entry  when  Harris  begins  business  ? 
Analyze  each  item  in  your  statement. 

6.  Harold  Leslie  is  to  open  a  dry  goods  business  in  your  city 
on  Oct.  1 ;   he  engages  you  as  bookkeeper  Sept.  1,  and  you  begin 
your  duties  at  once. 

How  would  you  proceed  to  open  the  books  ? 
What  work  would  you  have  on  the  books  during  the  month  of 
September  ? 

7.  Thomas  Anderson  has  been  bookkeeper  for  Judd  &  Co.     He 
has  resigned  on  account  of  impaired  health,  and  Judd  &  Co.  have 
employed  you  as  his  successor.    You  are  to  begin  your  duties  in 
four  weeks. 

What  would  you  do  on  assuming  the  duties  of  your  position? 
Would  it  be  well  for  you  to  spend  a  few  days  with  Mr.  Anderson 
before  he  left  ? 

EXERCISE  III 
ELEMENTARY  JOURNALIZING 

DIRECTIONS. — In  the  following  transactions  both  the  journal  entry 
and  the  explanation  should  be  stated;  also  the  rule  for  each  journal 
entry.  Have  student  act  as  proprietor.  Use  the  month  of  February. 

1.  Begin  business  and  invest  cash,  $2345. 

3.  Buy  for  cash  of  E.  C.  Weldon,  80  bbls.  flour  at  $6. 

5.  Sell  Morris  New  for  cash,  30  bbls.  flour  at  $7. 

7.  Sell  Geo.  Nash  on  account,  20  bbls.  flour  at  $6.50. 

8.  Buy  of  R.  H.  Collins  on  account,  70  bbls.  beef  at  $16. 
10.  Sell  J.  H.  Jacobs  on  account,  20  bbls.  beef  at  $17.50. 


4  TEACHER'S   MANUAL 

11.    Sell  John  Allen  for  cash,  10  bbls.  beef  at  $17.25. 
14.    Sell  Amos  Noble  10 'bbls.  beef  at  $18,  receiving  cash  $100 
and  the  balance  on  account. 

17.    Receive  cash  of  Geo.  Nash,  to  apply  on  account,  $100. 
19.   Pay  R.  H.  Collins  cash,  to  apply  on  account,  $100. 

23.  Withdraw  $60  for  personal  use. 

24.  Pay  one  month's  rent  in  cash,  $38. 

25.  Give  R.  H.  Collins  your  note  at  3   days  for  balance  on 
account,  $1020. 

26.  Amos  Noble  pays  you  $80,  in  full  of  account. 

27.  J.  H.  Jacobs  gives  you  his  note  at  10  days,  with  interest, 
in  full  of  account,  $350. 

27.  Buy  of  Asa  Kelly  60  bbls.  pork  at  $12,  paying  one-half 
cash ;  balance  on  account. 

28.  Pay  in  cash  your  note,  in  favor  of  R.  H.  Collins,  for  $1020. 
28.   Pay  bill  for  office  stationery  in  cash,  $17.20. 

28.    Give  Asa  Kelly  your  note  at  30  days,  with  interest,  for  $360. 
28.    The  proprietor  increases  his  investment  $1000  in  cash. 

NOTE.  —  If  the  teacher  so  desires,  the  above  may  be  posted,  state- 
ments made,  and  the  books  closed.  Varying  amounts  may  be  used 
for  inventories. 

EXERCISE  IV 
CASH-BOOK  ENTRIES 

DIRECTIONS. — Use  a  sheet  of  ordinary  journal  paper  and  record 
the  following  transactions  in  cash-book  form,  using  the  month  of 
November  for  dates. 


1.  Begin  business  this  day  and  invest  cash, 

2.  Pay  cash  for  a  set  of  office  books,  $9.75. 

3.  Buy  merchandise  of  C.  H.  Haswell  for  cash,  $368.40. 

4.  Pay  one  month's  rent  of  the  store  in  cash,  $26.50. 

5.  Sell  Frank  Arnold  merchandise  for  cash,  $236.25. 

6.  Pay  John  Newton  $67.45,  to  apply  on  account. 

NOTE. — The  credit  of  John  Newton's  account  and  all  similar 
accounts  is  recorded  in  books  outside  of  the  cash  book.  Only  the 
cash  transactions  of  the  business  are  given  in  this  set. 


STATEMENTS  5 

8.  John  Allen  pays  $126.75,  in  full  of  account. 

9.  Sell  E.  ]ST.  Carr  merchandise  for  cash,  $108.75. 

10.  Buy  merchandise  of  Henry  Willis  for  cash,  $627.30. 

11.  A  note  which  you  gave  Herman  Biggs  Oct.  11  falls  due 
to-day.     The  note  is  for  $275,  and  you  pay  it  in  cash. 

12.  S.  N.  Parsons  gave  you  his  note  on  Sept.  13  for  $300. 
The  note  falls  due  to-day,  and  he  pays  it  in  cash. 

13.  Sell  Samuel  Langdon  merchandise  for  cash,  $175.95. 

14.  You  pay  a  bill  of  sundry  items  for  office  use,  in  cash,  $8. 
16.    A  note  which  you  gave  W.  B.  Williams  on  Sept.  16  falls 

due  to-day.  You  pay  the  note  and  interest  in  cash.  Face  of  the 
note,  $200  ;  interest,  $2. 

18.  Amos  Osborn  gave  you  his  note  on  Oct.  18  for  $300.  He 
pays  the  note  and  interest  to-day  in  cash.  The  interest  amounts 
to  $1.50. 

20.  Pay  William  Larkin  $22.50,  to  apply  on  his  monthly 
salary. 

After  recording  the  above  transactions,  enter  the  balance  of 
cash,  and  close  the  cash  book. 

EXERCISE  V 
STATEMENTS 

From  the  data  given  below,  make  a  statement  of  (a)  resources 
and  liabilities,  and  (6)  losses  and  gains. 

Debit  footings : 

James  Corbin,  member  of  firm  $260. 

Cash  2875.25 

Hartford  Bank  2989. 

Real  Estate  7500. 

Merchandise  6650.89 

Bills  Receivable  2689. 

Bills  Payable  975.80 

Expense  167.50 

Interest  and  Discount  40.78 

Levi  Williams  900. 


6  TEACHER'S   MANUAL 

Credit  footings : 

James  Corbin,  member  of  firm  $6567.44 

John  Smith,  member  of  firm  7897.50 

Cash  1297.28 

Hartford  Bank  897.75 

Merchandise  5489.80 
Bills  Receivable                                .       1600. 

.  Bills  Payable  1275.80 

Interest  and  Discount  22.65 

Inventories : 

Merchandise  2405. 

Real  Estate  7800. 

Stationery  12.50 

From  the  data  given  below,  make  a  statement  of  (a)  resources 
and  liabilities,  and  (b)  losses  and  gains. 

Debit  footings : 

James  Ward,  Proprietor  $314.01 

Cash  3450.30 

Union  Bank  3586.80 

Real  Estate  9000. 

Merchandise  7981.07 

Bills  Receivable  3226.80 

Bills  Payable  1170.96 

Expense  201. 

Interest  and  Discount  48.93 

H.  B.  Howard  1080. 

Credit  footings : 

James  Ward,  Proprietor  7882.93 

J.  C.  Rowe  9477. 

Cash  1556.74 

Union  Bank  1077.30 

Merchandise  6587.76 

Bills  Receivable  1920. 

Bills  Payable  1530.96 

Interest  and  Discount  27.18 


ELEMENTARY  JOURNALIZING  7 

Inventories 

Merchandise  $2886. 

Real  Estate  9360. 

Expense  15. 

NOTE.  —  If  the  teacher  so  desires,  the  above  items  may  be  used  in 
making  a  balance  sheet ;  also  accounts  may  be  opened  in  the  ledger 
and  the  above  items  entered,  thus  completing  the  opening  of  a  set  of 
books. 

By  using  different  amounts  for  inventories  the  results  may  be  varied. 


EXERCISE  VI 

ELEMENTARY  JOURNALIZING  —  GIVING  AND 
RECEIVING  NOTES 

SUGGESTIONS. — After  journalizing  the  following,  the  cash  items  may 
be  placed  in  the  cash  book.  Use  the  month  of  March. 

1.  Give  H.  E.  Benton  your  note  at  10  days,  in  full  of  account, 
$432. 

4.  Geo.  Munson  gives  you  his  note  at  15  days,  with  interest, 
in  full  of  account,  $345. 

5.  Pay  rent  of  the  store  by  giving  the  owner,  James  Nellis, 
your  note  at  10  days,  $42. 

6.  H.  M.  Zaner  pays  you  the  interest  accrued  on  his  note  in 
cash,  $16.45. 

9.  You  pay  the  interest  on  your  note,  in  favor  of  Frank 
Storm,  in  cash,  $23.06. 

11.  You  owe  Jesse  Warner  $512 ;  give  him  cash  for  one-half 
the  amount,  and  your  note  at  10  days  for  the  balance. 

13.  C.  D.  White  owes  you  $268 ;  he  gives  you  cash  for 
one-half  the  amount  and  his  note  at  15  days,  with  interest,  for 
the  balance. 

15.  The  note  you  gave  James  Nellis  for  rent  of  store  is  now 
due  ;  pay  the  same  in  cash.  Amount  of  the  note,  $42. 

18.  Receive  cash  of  Geo.  Burns  for  his  note  and  interest  due 
to-day.  Face  of  note,  $425  ;  interest  accrued,  $10.65. 


8  TEACHER'S   MANUAL 

21.  You  owe  Peter  Culver  on  account,  $145 ;  interest  accrued 
on  overdue  items  amounts  to  $3.45.  Give  him  your  interest- 
bearing  note  for  $148.45. 

24.  Your  note  in  favor  of  Henry  Seton  is  due  to-day,  and  you 
redeem  it  by  issuing  a  new  note  for  the  same  amount,  $236.10. 

26.  Your  note,  in  favor  of  Samuel  Barnum  for  $200,  and  interest 
on  the  same,  $6.50,  is  due  to-day.  You  redeem  the  note  and  inter- 
est on  same  by  issuing  a  new  interest-bearing  note  for  $206.50. 

28.  The  note  of  Joseph  Harris,  in  your  favor  for  $300,  due 
to-day,  is  settled  by  his  giving  you  a  new  note,  bearing  interest, 
for  the  amount  of  the  old  note. 

30.  The  note  of  Willis  Gordon  and  interest  on  the  same  are 
due  to-day.  Face  of  note,  $420;  interest,  $7.80.  He  settles  by 
giving  you  a  new  note  for  $427.80,  bearing  interest. 

EXERCISE  VII 
ELEMENTARY  JOURNALIZING  —  ALLOWANCES 

SUGGESTIONS.  —  After  journalizing  the  following,  the  cash  items  may 
be  entered  in  the  cash  book.  Use  the  month  of  April. 

1.   John  King  prepays  an  invoice  amounting  to  $186.     You 
allow  him  a  discount  of  2%,  and  receive  the  balance  in  cash. 

5.    You  owe  Joel  Starr  $206  on  account,  and  pay  the  same  in 
cash,  less  3%. 

7.   Your  note  for  $450,  in  favor  of  Ira  Johnson,  is  paid  to-day, 
less  90  days'  discount. 

9.    Ernest  Garrett  pays  his  note  in  your  favor,  less  60  days' 
discount ;  face  of  the  note,  $654. 

13.  There  is  a  mortgage  on  your  house  and  lot  amounting  to 
$2200;  to-day  one  year's  interest  is  due,  $110.  Settle  for  the 
interest,  by  giving  your  note  at  10  days.  The  mortgage  is  held 
by  Chas.  Bennett. 

16.  Your  note  for  $678,  in  favor  of  Elmer  Stevens,  and  interest 
amounting  to  $12,  are  due  to-day.  Give  him  your  check  for  one- 
half  the  amount,  and  your  10-day  note,  with  interest,  at  10  days, 
for  the  other  half. 


CLOSING  ENTRIES  FOR   INDIVIDUAL  PROPRIETOR      9 

20.  You  sell  James  Munhall  100  bbls.  flour  at  $6.25  per  bbl., 
and  receive  in  payment  his  check  for  $325,  and  your  note  which 
he  held  for  the  balance,  $300. 

21.  Buy  of  Howard  Cleary  60  bbls.  beef  at  $16.50  per  bbl., 
and  give  him  in  payment  your  check  for  $600,  and  his  note  which 
you  hold  for  $390. 

23.  Your  office  safe  is  too  small,  and  you  sell  it  to  Edgar  Field 
for  $65,  and  receive  his  note,  at  10  days,  with  interest,  for  that 
amount. 

How  would  the  entry  be  changed  in  the  above  if  you  had  sold 
the  safe  and  received  cash? 

26.  You  have  Isaac  Shaw's  note  for  $600,  with  interest,  at  90 
days.  The  note  has  run  for  30  days,  and  you  discount  it  at  the 
bank  and  receive  cash  for  the  proceeds. 

28.  You  have  John  Davis'  note  for  $400,  with  interest,  at  60 
days.  The  note  has  run  for  30  days,  and  you  discount  it  at  the 
bank  and  receive  cash  for  the  proceeds. 

30.  You  receive  to-day  William  Weaver's  30-day  note  for  $300, 
without  interest.  You  discount  it  at  once  and  receive  cash  for 
the  proceeds. 

EXERCISE  VIII 
CLOSING  ENTRIES  FOR  AN  INDIVIDUAL  PROPRIETOR 

1.  H.  B.  English  invested  $3000  in  business,  and  at  the  close 
of  one  year  the  losses  and  gains  of  the  business  were  as  follows : 
gain  on  merchandise,  $266.55  ;  loss  on  expense,  $106.20;  gain  on 
discount,  $46.75. 

His  withdrawals  during  the  year  amounted  to  $400. 

Open  an  account  with  the  proprietor,  and  with  Loss  and  Gain ; 
close  the  Loss  and  Gain  account,  and  show  the  proprietor's  present 
worth. 

Is  he  worth  more  or  less  than  at  the  beginning  of  the 
year? 

What  effect  did  the  withdrawals  have  upon  the  net  results  of 
the  year's  business  ? 


10  TEACHER'S  MANUAL 

2.  Donald  B.  Caffrey  invested  $2600  in  business,  and  at  the 
close  of  one  year  the  losses  and  gains  of  the  business  were  as 
follows  :  gain  on  merchandise,  $753.20  ;  loss  on  expense,  $156.42 ; 
gain  on  interest,  $12.35  ;  loss  on  discount,  $19.48. 

Open  an  account  with  the  proprietor,  and  with  Loss  and  Gain ; 
,  close  the  Loss  and  Gain  account,  and  show  the  proprietor's  present 
worth. 

Analyze  the  proprietor's  account  and  the  Loss  and  Gain  account. 

3.  Henry  Barber  invested  $2000  in  business,  and  at  the  close 
of  the  year  the  losses  and  gains  of  the  business  were  as  follows : 
gain  on  merchandise,  $127.40 ;  loss  on  expense,  $210.65;  gain  on 
discount,  $13.25. 

His  withdrawals  during  the  year  were  $300. 

Open  an  account  with  proprietor  and  with  Loss  and  Gain ;  close 
the  Loss  and  Gain  account,  and  show  the  proprietor's  present  worth. 

What  is  the  net  result  shown  by  the  business  ? 

How  much  less  is  the  proprietor  worth  than  at  the  beginning 
of  business  ?  Why? 

Why  is  the  difference  between  his  investment  and  his  present 
worth  at  the  closing  considerably  more  than  the  loss  shown  by 
the  Loss  and  Gain  account  ? 

4.  John  Benton  invested  $1800  in  business,  and  at  the  close 
of  the  year  the  losses  and  gains  of  the  business  were  as  follows : 
gain  on  discount,  $45.60 ;  loss  on  merchandise,  $1250 ;  gain  on 
interest,  $22.46  ;  loss  on  expense,  $136.54. 

During  the  year  he  withdrew  $750. 

Open  an  account  with  the  proprietor;  and  with  Loss  and  Gain ; 
close  the  Loss  and  Gain  account,  and  show  the  proprietor's  net 
insolvency. 

What  conditions  operated  to  cause  insolvency,  aside  from  the 
losses  sustained? 

Could  the  proprietor  continue  in  business  after  such  a  showing  ? 

5 .  Willis  Avery  wished  to  engage  in  business,  but  had  no  capital 
of  his  own.     He  borrowed  $2000  to  begin  business.    At  the  close 
of  the  year  the  losses  and  gains  were  as  follows :  gain  on  merchan- 
dise, $620  ;  loss  on  expense,  $175;  gain  on  discount,  $56.24;  loss 
on  interest,  $125. 


ELEMENTARY  TEST  11 

During  the  year  he  withdrew  $150  for  personal  use. 
Open  the  necessary  accounts  and  the  Loss  and  Gain  account. 
Has  the  proprietor  an  investment  account? 
Into  what  account  is  the  Loss  and  Gain  closed? 


EXERCISE  IX 
ELEMENTARY  TEST 

1.  What  is  a  journal  ? 

2.  What  are  the  distinct  uses  of  the  journal? 

3.  What  are  unit  rulings  ? 

4.  What  is  an  explanation,  and  what  is  its  value  ? 

5.  What  is  the  form  for  a  simple  entry  ?     Illustrate. 

6.  What  is  the  form  for  a  compound  entry  ?     Illustrate. 

.     7.   Why  must  the  debits  and  credits  be  equal  in  each  journal 
entry  ? 

8.  What  is  the  importance  of  paging  in  the  journal  ? 

9.  As  evidence  in  a  court  of  law,  which  part  of  the  journal 
entry  is   the   more  valuable,  the   journal   entry  proper   or  the 
explanatory  part  ?     Why  ? 

10.  What  is  bookkeeping?     What  is  the  object  of  keeping 
accounts  ? 

11.  Give  the  general  rule  for  journalizing. 

12.  Give  rules  for  journalizing  the  following  : 

a.  Proprietor's  account.  b.  Merchandise  account. 

c.  Personal  accounts. 

13.  Name  two  classes  of  accounts. 

14.  Name  three  kinds  of  accounts. 

15.  To  which  class  does  each  of  the  following  belong? 

a.  Merchandise.  b.   Cash. 

c.  A  personal  account. 

16.  Which  side  of  the  following  accounts  should  be  the  larger 
if  there  is  any  difference  between  the  sides  ? 

a.  Cash,  b.  Bills  Payable. 

c.   Bills  Receivable. 


12  TEACHER'S   MANUAL 

17.  Define  each  of  the  following  terms  : 

a.  Merchandise.  d.    Discount. 

b.  Expense.  e.    Cash. 

c.  Interest.  f.   Bills  Payable. 

g.    Bills  Receivable. 

18.  Name  three  accounts  that  may  show  a  loss  or  a  gain. 

19.  How  do  you  close  an  account  having  a  resource  inven- 
tory ? 

20.  How  do  you  close  a  merchandise  account  when  there  is 
no  inventory? 

EXERCISE  X 
ELEMENTARY  TEST 

1.  What  is  a  ledger? 

2.  Why  is  the  proprietor's  account  usually  placed  first  in  the 
ledger  ? 

3.  Why  is  the  journal  page  transferred  to  the  ledger  in  posting  ? 

4.  What  is  the  value  of  paging  when  an  account  is  closed  by 
balance  and  the  balance  carried  to  another  page  ? 

5.  What  do  we  mean  by  closing  an  account  ?     (Apply  this  to 
the  different  kinds  of  accounts.) 

6.  What  is  the  value  of  pencil  footings  in  the  ledger  ? 

7.  Name  some  accounts  in  the  ledger  that  are  termed  real 
accounts. 

8.  Name  some  accounts  in  the  ledger  that  are  termed  repre- 
sentative accounts. 

9.  Under  what  conditions  should  a  real  account  be  closed? 

10.  Under  what  conditions  should  a  representative  account  be 
closed  ? 

11.  When  is  the  Loss  and  Gain  account  opened  in  the  ledger  ? 
Why? 

12.  What  does  the  difference  between  the  sides  of  the  Cash 
account   show?     Is  such   difference   a   resource   or   a  liability? 
Why? 


ELEMENTARY  TEST  13 

13.  To  which  class  of  accounts  do  the  following  belong? 

a.  Interest.  c.   Discount. 

b.  Bills  Payable.  d.   Bills  Receivable. 

14.  How  is  the  gain  on  merchandise  found?     How  do  you 
find  the  present  worth  ? 

15.  What  does  the  business  statement  show  ? 

16.  How  frequently  is  it  necessary  to  show  the  proprietor's 
present  worth? 

17.  Just  what  accounts  must  be  closed  to  find  the  present 
worth? 

18.  Why  is  it  necessary  to  have  all  inventories  before  closing 
the  books  ?     How  are  the  different  inventories  found  ? 

19.  Tell  definitely  how  you  would  close  the  following : 

a.  Merchandise.  d.    Discount. 

b.  Expense.  e.    Loss  and  Gain  account. 

c.  Interest.  /.    Proprietor's  account. 

20.  How  are  the  following  accounts  closed  ? 

a.   Cash.  .       b.   Bills  Receivable. 

c.   Personal  accounts. 

21.  Write  the  following,  supplying  all  necessary  data  : 

a.  A  promissory  note.          c.    A  receipt. 

b.  A  check.  d.   A  blank  indorsement. 

e.   A  full  indorsement. 


EXERCISE  XI 

ELEMENTARY  TEST 

1.  Why  is  a  cash  book  used  in  business  ? 

2.  What  does  the  balance  of  the  cash  book  show? 

3.  How  is  such  balance  proved  to  be  correct  ? 

4.  Why  is  it  not  necessary  to  keep  a  cash  account  in  the 
ledger  when  a  cash  book  is  used  ? 


14  TEACHER'S   MANUAL 

5.    What  is  the  difference  between  bills  receivable  and  bills 
payable  ? 

*   6.   What  is  the  difference  between  a  bill  and  bills  receivable  or 
bills  payable  ? 

7.  Of  what  value  is  numbering  (a)  on  checks?  (b)  on  check 
stubs  ? 

8.  What  is  the  necessity  for  taking  a  trial  balance  ? 

9.  Just  what  does  the  trial  balance  prove  ? 

10.  What  is  the  value  of  a  trial  balance  to  (a)  the  bookkeeper  ? 
(&)  the  proprietor  ? 

11.  Do  errors  in  journalizing  affect  the  equality  of  the  ledger  ? 
Why? 

12.  What  advantage  is  there  in  using  the  following  books  ? 

a.   Cash  book.  b.   Sales  book. 

c.    Invoice  book. 

13.  How  do  you  post  from  the  following  books  ? 

a.  Journal.  c.    Sales  book. 

b.  Cash  book.  d.   Invoice  book. 

14.  What  do  each  of  the  following  terms  mean  ? 

a.   On  account.  b.    1/10,  30  days  net. 

c.   Note,  15  days. 

15.  If  goods  are  sold  on  account  when  is  the  bill  for  the  same  due  ? 

16.  Why  do  we  close  accounts  showing  losses  and  gains  ? 

17.  How  do  we  close   personal   accounts,  and  when  is  such 
closing  necessary? 

18.  Why  is  a  red-ink  entry  always  transferred  to  the  opposite 
side  of  an  account  ? 

19.  How  are  errors  in  a  trial  balance  to  be  found? 

20.  What  additions  must  be  gone  over  if  there  is  an  error  in  a 
trial  balance? 

21.  If  the  error  in  the  trial  balance  is  1, 10, 100,  or  1000,  what 
mistake,  ordinarily,  has  been  made  ? 


ELEMENTAEY  TEST  15 

EXERCISE  XII 
ELEMENTAEY  TEST 

1.  What  is  a  business  statement  ? 

2.  If  the  resources  are  larger  than  the  liabilities,  what  is  the 
condition  of  the  business  ? 

3.  If  the  liabilities  are  larger  than  the  resources,  what  is  the 
condition  of  business  ?  • 

4.  Define  check.    From  memory  write  an  ordinary  check. 

5.  Why  do  erasures  affect  the  validity  of  a  check  or  note  ? 

6.  How  is  an  invoice  receipted  ?     Illustrate. 

7.  How  is  a  bill  receipted  if  paid  by  note  ?     Illustrate. 

8.  Why  is  it  important  to  number  notes  and  checks  ? 

9.  What  ought  you  to  know  of  a  party  before  selling  to  him 
on  account? 

10.  How  can  exact  and  reliable  information  regarding  a  busi- 
ness man  be  obtained  ? 

11.  If  the  debit  side  of  a  personal  account  is  the  larger,  what 
does  the  account  show  ? 

12.  To  which  class  of  accounts  do  personal  accounts  ordinarily 
belong  ? 

13.  What  does   the   Merchandise  account  show  after  it  has 
been  closed  and  the  inventory  has  been  brought  below  the  ruling  ? 

14.  There  are  six  necessary  steps  in  closing  the  Merchandise 
account ;  name  them. 

15.  If  the  amount  of  an  error  in  the  trial  balance  is  9  or  some 
multiple  of  9,  what  is  the  probable  error  ? 

16.  If  it  is  necessary  to  check  over  the  posting  how  should  such 
checking  be  done ;  that  is,  in  what  order  ? 

17.  Where  are  the  check  marks  to  be  placed  in  the  different 
books  ? 

18.  What  error  in  the  journal  would  not  affect  the  equality  of 
the  ledger  after  posting  ? 

19.  What  error  in  the  journal  would  affect  the  equality  of  the 
ledger  after  posting  ? 


16  TEACHER'S   MANUAL 

20.  How  are  errors  in  the  journal  to  be  discovered  before  we 
proceed  to  post  ? 

'21.  What  error  in  posting  would  not  affect  the  equality  of  the 
ledger  ? 

22.  What  error  in  posting  would  affect  the   equality  of   the 
ledger  ? 

23.  What  errors  are  likely  to  be  made  in  the  sales  book? 

24.  How  may  errors  in  a  sales  book  be  discovered? 

EXERCISE  XIII 
ELEMENTARY  TEST  — CLOSING  THE   LEDGER 

Open  an  account  with  the  student  as  proprietor,  using  the 
following  items : 

Dr.  Cr. 

$85.  $2200. 

Open  an  account  with  Merchandise,  using  the  following  items  : 

Dr.  Cr. 

$500.50  $458. 
308.75  246.77 

567.20  396.85 

476.35  557.23 

Merchandise  inventory,  $627. 

Open  an  account  with  Expense,  using  the  following  items : 

Dr. 

$35. 
22. 
12.50 

Expense  inventory,  $24. 

The  above  may  be  used  as  a  test,  the  student  opening  a  loss 
and  gain  account,  and  then  closing  the  accounts  given.  Dates 
and  paging  for  the  ledger  accounts  should  be  supplied  by  the 
teacher. 


ELEMENTARY  TEST  — CLOSING  THE   LEDGER        17 

As  a  class  exercise  the  above  may  be  used  as  follows : 

Analyze  the  debits  and  credits  of  each  account. 

Omit  the  inventory  and  close  the  Merchandise  account. 

Note  the  difference  in  the  net  result  when  an  inventory  is  used 
and  when  it  is  not  used. 

Under  what  conditions  would  there  be  no  inventory  in  a 
business  ? 

Omit  the  inventory  and  close  the  Expense  account.  What  is 
the  effect  on  the  net  result  shown  by  the  account  ?  Why  ? 

Under  what  conditions  would  there  be  no  inventory  in  an 
expense  account? 

What  effect  does  a  withdrawal  have  upon  the  proprietor's 
account?  Why? 

When  the  business  shows  a  net  loss  how  is  the  proprietor's 
account  closed? 

NOTE.  — The  teacher  may  do  a  great  deal  of  work  like  the  above, 
and  thus  add  to  the  knowledge  and  efficiency  of  the  class.  Different 
amounts,  inventories,  paging,  etc.,  may  be  given  to  different  students, 
and  the  net  results  compared. 

EXERCISE  XIV 

ELEMENTARY  TEST  — CLOSING  THE   LEDGER 

Open  an  account  with  the  student  as  proprietor,  using  the  fol- 
lowing items : 

Dr.  Cr. 

$150.  $2850. 

Open  an  account  with  Expense,  using  the  following  items : 

Dr.  Cr. 

$45.          .  $20. 

37.50 
15.25 
33.40 
Expense  inventory,  $65. 


18  TEACHER'S   MANUAL 

Open  an  account  with  Merchandise,  using  the  following  items : 

Dr.  Cr. 

$856.20  $562.65 

733.85  328.54 

432.50  217.64 

912.67  674.32 

433.89  512.04 

298.46  482.56 

119.78 
Merchandise  inventory,  $1256.80. 

Open  an  account  with  Interest,  using  the  following  items : 

Dr.  Cr. 

$5.65  $4.35 

3.10  3.25 

2.45 
1.67 

Open  an  account  with  Discount,  using  the  following  items : 

Dr.  Cr. 

$3.40  $5.75 

2.75  3.46 

1.10  6.52 

3.45 
1.75 

The  above  may  be  used  as  a  test,  the  student  opening  a  loss 
and  gain  account,  and  then  closing  the  accounts  given.  Dates 
and  paging  should  be  supplied  by  the  teacher. 

As  a  class  exercise  the  above  may  be  used  as  follows : 

Analyze  each  ledger  account. 

For  additional  work  follow  the  suggestions  given  under 
Exercise  XIII. 


ERASURES  19 

EXERCISE  XV 
ERASURES 

SUGGESTIONS.  — Dictate  a  short  journal  exercise  and  then  show  how 
to  make  the  following  corrections :  (a)  a  change  in  an  amount ;  (b)  a 
change  in  an  entry. 

Dictate  a  short  ledger  exercise  and  then  show  how  to  make  the 
following  corrections  :  (a)  an  amount  written  on  the  wrong  side ;  (6)  a 
transposition  of  figures. 

When  errors  have  been  discovered  on  books  of  account,  they 
should  be  promptly  and  carefully  corrected.  The  use  of  the 
eraser  for  making  corrections  should  not  be  permitted.  Where 
it  is  found  necessary  to  change  any  item  written  in  ink  in  the 
ledger,  cash  book,  journal,  etc.,  the  particulars  of  the  change 
should  be  indicated  in  some  manner;  that  is,  the  correction 
should  be  made  in  such  a  way  as  to  make  the  reason  for  the 
change  readily  apparent. 

An  erasure  in  books  of  record  is  always  regarded  with  more  or 
less  suspicion  by  auditors  or  any  person  who  may  find  it  desirable 
to  look  over  the  books.  The  accountant  also  usually  finds  it 
embarrassing,  if  not  exceedingly  difficult,  to  satisfactorily  explain 
why  a  particular  erasure  has  been  made. 

In  bank,  corporation,  and  all  high-grade  accounting  few,  if  any, 
erasures  are  found  in  the  books  of  record.  To  a  certain  extent 
erasures  foster  carelessness  and  dishonesty,  and  have  a  tendency 
to  weaken  the  strength  of  any  entry  as  a  permanent  and  valuable 
record.  Some  accountants  make  all  corrections  of  errors  in  post- 
ing by  a  contra  entry;  i.e.,  an  entry  on  the  opposite  side  of  the 
ledger  account  designated  by  the  words  "  By  error  "  or  "  To  error," 
to  cancel  the  record  erroneously  made.  After  the  contra  entry 
has  been  made,  the  item  may  be  correctly  entered.  Auditors,  etc., 
prefer  to  have  all  errors  of  this  kind  corrected  by  ruling  carefully 
and  neatly  in  red  ink  through  the  amount  that  is  wrong,  and  then 
writing  the  amount  correctly  in  black  ink  just  above  the  figures 
which  have  been  canceled.  This  gives  a  brief  history  of  the 


20  TEACHER'S   MANUAL 

error,  makes  proper  corrections,  and,  if  done  neatly,  does  not 
detract  in  any  appreciable  way  from  the  general  appearance  of 
the  work  done.  Where  a  wrong  entry  has  been  made  in  the 
journal,  cash  book,  etc.,  corrections,  in  most  cases,  should  be 
made  by  ruling  a  red  line  through  what  is  wrong  and  writing  the 
entry  correctly  just  above  the  items  canceled. 


EXERCISE  XVI 
INDEXING 

A  good  accountant  not  only  keeps  accurate  records,  but  the 
information  contained  in  those  records  is  instantly  available  for 
reference.  One  of  the  chief  aids  to  ready  reference  is  a  system 
of  indexing.  Various  records  are  indexed,  but  the  information 
given  below  applies  chiefly  to  ledger  indexing. 

In  a  small  business  a  few  pages  of  the  ledger  are  arranged  for 
indexing ;  in  a  large  business  a  separate  book  is  used. 

A  page  or  a  part  of  a  page  is  set  apart  for  the  use  of  each  letter. 
All  names  beginning  with  A  are  placed  under  that  letter.  We 
will  illustrate  by  using  several  names :  John  Adams,  page  23 ; 
Peter  Anson,  page  145 ;  Win.  Appleton  &  Son,  page  67. 

Under  A  these  would  be  arranged  as  follows  : 

A 

Adams,  John,  23 
Anson,  Peter,  145 
Appleton,  Wm.,  &  Son,  67 

In  indexing  names  the  surname  is  always  written  first,  and  the 
Christian  name  follows.  The  number  after  each  name  indicates 
the  page  of  the  ledger  on  which  the  person's  account  may  be 
found.  Before  opening  an  account  in  a  ledger  the  name  should 
be  indexed. 

An  interesting  class  exercise  is  to  make  an  alphabetical  index 
of  the  names  of  all  in  the  class. 


INDEXING 


21 


The  Vowel  System  of  Indexing.  —  In  a  very  large  index  the 
alphabetical  system  would  not  be  satisfactory.  If  there  were 
several  pages  of  names  beginning  with  S,  for  instance,  it  would 
take  too  much  time  to  find  a  name. 

In  the  vowel  system  there  is  a  space  allotted  for  each  letter,  as 
in  the  alphabetical  arrangement,  and  this  space  is  then  divided 
into  six  divisions,  one  for  each  vowel,  A,E,I,  0,  U,  Y.  Suppose 
we  take  the  letter  S  and  arrange  a  series  of  names  according  to 
the  vowels. 

We  will  take  the  following  list  of  names  :  Jas.  Sand,  John  Sell, 
Wm.  Silent,  A.  B.  Soule,  E.  M.  Sulzer,  T.  B.  Syren.  These  names 
all  begin  with  S,  and  each  name  is  placed  under  the  vowel  that 
immediately  follows  the  initial  letter.  By  this  arrangement  one 
need  consult  only  a  portion  of  the  index  under  any  given  letter 
to  find  the  required  name. 

S 


A 

0 

Sand,  Jas.,  32 

Soule,  A. 

B.,  70 

E 

U 

SeU,  John,  46 

Sulzer,  E. 

M.,  78 

/ 

F 

Silent,  Wm.,  67 

Syren,  T. 

B.,  109 

The  teacher  may  have  his  class  arrange  their  names  under  a 
vowel  index. 

In  a  large  set  of  books  paging  is  done  before  posting.  The 
page  of  each  account,  as  found  in  the  index,  is  placed  opposite 
the  item  to  be  posted  ;  then  as  each  item  is  posted  a  check  mark 
(>/)  is  placed  next  to  the  folio  figures.  If  the  paging  is  in  red 
ink  and  the  check  mark  in  black  ink,  it  makes  both  paging  and 
checking  more  conspicuous. 


22  TEACHER'S   MANUAL 

EXERCISE  XVII 
TERMS  OF  PURCHASE  AND   SALE 

The  following  apply  to  terms  on  invoices  : 

1.  Terms :  on  account. 

When  is  the  above  due  ? 

Does  the  purchaser  pay  the  face  of  the  bill,  or  does  he 

get  it  for  less  ? 
Does  the  seller  realize  the  face  of  the  bill  or  invoice  ? 

2.  Terms :  cash. 

Are  these  terms  always  the  best  for  the  buyer  ? 
Are  cash  terms  always  the  best  for  the  seller  ? 

3.  Terms :  cash,  l£%. 

How  does  No.  3  differ  from  No.  2  ? 

4.  Terms:  10  days. 

When  is  a  bill,  under  such  terms,  due  ? 

Which  terms  are  the  better  for  the  seller,  No.  1  or  No.  2  ? 

5.  Terms :  3/5,  net  30  days. 

Just  what  do  the  above  terms  mean  ? 

Why  are  different  terms  quoted  on  the  same  bill  ? 

Explain  "net  30  days." 

6.  Terms  :  5/10,  net  30  days. 

Explain  the  above  terms. 

If  the  seller  receives  payment  within  10  days  will  he  real- 
ize the  face  of  the  bill? 

If  the  buyer  pays  within  10  days  what  effect  will  it  have 
upon  the  selling  price  of  his  goods  ? 

Why  would  a  seller  offer  such  a  large  discount  for  early 
payment  ? 

7.  Terms  :  2/5,  net  60  days. 

Explain  the  above  terms. 

How  does  No.  7  differ  from  No.  6  ? 

How  does  No.  7  differ  from  No.  5? 

8.  Terms :  on  account,  10  days. 

How  does  No.  8  differ  from  No.  1  ? 


TERMS   OF   PURCHASE   AND    SALE  23 

9.    Terms  :  30 -day  note,  from  date  of  bill. 

What  advantage  is  it  for  the  seller  to  receive  such  a  note  ? 
Can  he  realize  the  money  on  it  before  it  is  due  ? 
How  does  this  differ  from  "  on  account,  30  days  "  ? 

10.  Terms  :  30 -day  note,  from  date  of  bill,  with  interest  at  6%. 

How  does  No.  10  differ  from  No.  9  ? 

Is  No.  10  better  for  the  seller  than  No.  9  ? 

If  the  seller  discounts  the  note,  is  No.  10  better  than 

No.  9  ?     Give  reasons  for  your  answer. 
Apply  the  terms  of  No.  9  and  No.  10  to  a  bill  of  $684.50, 

the  notes  being  discounted,  and  compare  the  results. 

11.  Terms:   30-day  note   in    10   days,  with  interest   at   6%, 

less  1%. 

How  do  the  terms  of  No.  11  differ  from  Nos.  9  and  10? 
Does  the  face  of  the  note  in  No.  11  differ  from  either 

No.  9  or  No.  10  ? 
Apply  the  above  terms  to  the  same  amount  given  in 

No.  10,  discounting  the  note,  and  compare  results. 

(Discount  each  note  for  the  full  time  it  has  to  run.) 

12.  Terms  :  New  York  draft,  less  2%. 

Explain  the  above  fully  and  note  the  relative  advantage 
to  both  buyer  and  seller. 

13.  Terms :  sight  draft  in  10  days  for  the  amount  of  the  bill, 

less  1%. 

Fully  explain  the  meaning  of  the  above  terms. 
When  should  the  sight  draft  be  drawn  ? 
How  would  the  sight  draft  be  drawn  ? 
How  does  No.  13  differ  from  No.  12  ? 

14.  Terms  :  10-day  draft,  less  2%. 

Is  the  draft  in  No.  14  the  same  kind  as  in  No.  13  ? 
Make  a  clear  distinction  between  No.  14  and  No.  13  ? 
On  a  bill  of  $438.25  apply  the  terms  of  both  No.  13  and 
No.  14,  and  note  the  difference  in  the  net  result. 

15.  Terms :  3/10,  1/30,  net  60  days. 

Fully  explain  the  above. 

Apply  the  terms  to  an  invoice  of  $974.20,  and  note  the 
net  results  to  the  seller. 


24  TEACHER'S   MANUAL 

16.  Terms :  New  York  draft  for  one-half  the  bill ;  balance  in 

30  days,  less  1%. 
Would  the  discount  be  taken  off  the  entire  bill  or  only 

one-half  of  it  ? 
Apply  the  terms  to  a  bill  of  $1000,  and  note  the  net 

results  to  the  seller. 

17.  Terms:  net  10  days,  F.O.B.,  Boston. 

When  do  the  seller's  expenses  regarding  shipment  cease  ? 
When  do  the  buyer's  expenses  regarding  shipment  begin? 
Just  what  do  the  above  terms  mean  ? 

18.  Terms  :  C.O.D.,  less  2%,  by  American  Express. 

Under  the  above  terms  to  whom  does  the  seller  deliver 
the  goods  ?  From  whom  does  he  receive  the  returns  of 
the  shipment? 

From  whom  does  the  buyer  receive  them  ? 

Under  what  conditions  are  such  terms  desirable  ? 

What  is  the  particular  service  rendered  by  the  express 
company? 

Who  pays  the  charges  on  C.O.D.  shipments? 

19.  Terms :  C.O.D.,  less  3%,  to  the  order  of  Merchants  Bank. 

Under  the  above  terms  to  whom  does  the  seller  deliver 
the  goods  ? 

From  whom  does  the  buyer  receive  them  ? 

What  part  does  a  bill  of  lading  have  in  the  above  ? 

What  action  must  the  buyer  take  before  he  can  get  the 
goods  ? 

Under  what  conditions  will  a  railroad  company  deliver 
goods  ? 

From  whom  will  the  seller  receive  returns  from  the  ship- 
ment? 

What  charges  are  there  for  collections  like  the  above,  and 
who  bears  them  ? 

NOTE.  — This  exercise.on  terms  is  sufficiently  suggestive  for  a  teacher 
to  conduct  an  interesting  and  profitable  lesson.  By  consulting  a  num- 
ber of  business  houses  other  terms  may  be  secured,  if  the  teacher  so 
desires. 


BUSINESS   FORMS  25 

EXERCISE  XVIII 
BUSINESS  FORMS 

SUGGESTIONS.  —  Write  the  following  forms  and  then  make  the 
entries  for  all  the  parties. 

1.  James  Wilson  owes  you  $168,  and  pays  you  $85.50.    Write 
the  receipt. 

2.  John  Smith  owes  you  $400,  and  you  draw  a  sight  draft  on 
him,  in  favor  of  yourself,  for  that  amount.     Write  the  draft. 

3.  Draw   a   time    draft    payable    after    sight,    observing    the 
following  conditions : 

Place,  Pittsfield,  Mass. 
Date,  January  1,  1903. 
Time,  30  days. 
Amount,  $165.86. 
Drawer,  yourself. 

Drawee,  D.  M.  Cole,  Boston,  Mass. 
Payee,  John  Rich,  Boston,  Mass. 
Write  the  acceptance. 

4.  Draw  a  time  draft,  observing  the  following  conditions : 

Place,  Albany,  New  York. 
Date,  March  1,  1903. 
Time,  60  days. 
Amount,  $250. 
Drawer,  Henry  Brown. 
Drawee,  yourself,  Springfield,  Mass. 
Payee,  William  Jones,  Springfield,  Mass. 
Write  the  acceptance. 

5.  Write  a  check,  observing  the  following  conditions  : 

Place,  Hartford,  Conn. 

Date,  April  1,  1903. 

Bank,  First  National,  Hartford,  Conn. 

Maker,  yourself. 

Payee,  John  Mark. 

6.  George  Wells  owes  you  $100  and  pays  the  entire  amount. 
Write  the  receipt. 


26  TEACHER'S   MANUAL 

7.  Write  a  promissory  note,  observing  the  following  condi- 
tions : 

Place,  Portland,  Me. 

Date,  February  1,  1903. 
Time,  100  days. 
Maker,  yourself. 
Payee,  James  Tree. 
Payable  at  Union  Bank. 
Interest,  6%. 

This  note  is  transferred  to  Henry  Wilde  by  full  indorsement. 

EXERCISE  XIX 
JOURNALIZING  — BANK  AND   PERSONAL  DRAFTS 

May  1.  Sold  O.  M.  Pratt  merchandise  amounting  to  $6218. 
Received  in  payment  the  following:  cash,  $1800 ;  his  check,  $1218 ; 
a  New  York  draft,  $1000  ;  his  note  at  30  days  with  interest,  $800; 
his  sight  draft  on  A.  C.  Carter,  $750 ;  balance  on  account. 

NOTE.  —  For  the  purpose  of  illustrating  the  principles  of  debit  and 
credit,  transactions  like  the  above  may  be  journalized  as  a  compound 
entry.  In  business,  however,  the  items  would  be  entered  in  different 
books  of  record, — cash  book,  journal,  etc.  The  teacher  should  explain. 

2.  Bought  of  0.  M.  Butler  merchandise  amounting  to  $5420. 
Gave  in  payment  the  following :  my  check  for  $920 ;  a  sight  draft 
on  Chas.  Heald  for  $1500 ;  my  note  with  interest,  at  60  days, 
$1200  ;  cash,  $800 ;  balance  on  account. 

3.  Gave  L.  D.  Parker  a  sight  draft  on  Geo.  Miller  for  $346.95, 
to  apply  on  account. 

4.  Received  of  Thomas  Gorham  a  sight  draft  on  Wm.  Downes 
for  $267.25,  to  apply  on  account. 

5.  Gave  David  Wells  the  sight  draft  I  received  of  Thomas  Gor- 
ham, to  apply  on  account. 

6.  Bought  merchandise  of  Y.  M.  Grady  amounting  to  $896.40. 
Gave  in  payment  my  note  at  90  days,  with  interest,  for  $496.40, 
and  Isaac  Potter's  note,  which  I  held  for  $400. 


CASH-BOOK  ENTRIES  27 

7.  Gave  David  Cress  my  sight  draft  on  R.  H.  Hilpot  to  apply 
on  account,  $23-5. 

8.  Insured  my  store  and  contents,  valued  at  $15,000,  in  the 
Niagara  Insurance  Company  for  full  value  ;  premium,  l£%,  paid 
by  check. 

9.  Gave  David  Beeson  my  check  to  apply  on  account,  $640. 

10.  Remitted  to  David  Olney  a  New  York  draft  for  $76.50,  to 
apply  on  account. 

11.  Received  of  Amos  D wight,  to  apply  on  account,  his  check 
for  $1225. 

12.  Received  of  Albert  Melrose  a  New  York  draft,  to  apply  on 
account,  $1625. 

13.  Bought  of  William  Grayson  real  estate  for  $16,800,  and 
paid  for  the  same  as  follows :    the  check  received  from  Amos 
Dwight ;  the  New  York  draft  received  of  Albert  Melrose ;    my 
check  for  $5150;  a  sight  draft  on  Wilson  &  Co.  for  $2,000;  a 
mortgage  on  the  property  for  the  balance. 

14.  I  am  informed  by  the  Union  Bank  that  my  account  is 
overdrawn  $121.45,  and  at  once  deposit  $254. 

NOTE.  —  After  journalizing  the  above  enter  all  cash  items  in  the 
cash  book. 

EXERCISE  XX 
CASH-BOOK  ENTRIES 

SUGGESTIONS.  — Use  a  sheet  of  ordinary  journal  paper  and  record  the 
following  transactions  in  cash-book  form,  using  the  month  of  January 
for  the  dates.  These  items  do  not  afford  a  connected  series  of  trans- 
actions, but  outline  a  useful  cash-book  exercise.  After  recording  the 
transactions  close  the  cash  book. 

1.  You  make  a  cash  investment  in  business  of  $2800. 

2.  For  subrental  of  a  part  of  your  store,  John  Harris  pays  you 
in  cash,  $165. 

3.  For  an  office  outfit,  books,  stationery,  furnishings,  etc.,  you 
pay  William  Norton  $142.70. 


28  TEACHER'S   MANUAL 

4.  You  pay  Ernest  Hamill  cash,  to  apply  on  account,  $875.40. 

5.  A.  P.  Jensen  pays  you  cash,  to  apply  on  account,  $356.70. 
'    6.    You  hold  David  Ware's  note  for  $1250,  and  it  has  yet  60 

days  to  run.     Discount  the  note  at  the  First  National  Bank  and 
receive  credit  for  the  proceeds.     The  note  is  without  interest. 

7.  Andrew  Ellis  holds  your  note  for  $850.    It  has  yet  86  days 
to  run,  but  he  offers  to  discount  it  at  6%  for  the  unexpired  time 
if  you  pay  it  now.     Make  the  payment,  less  discount. 

8.  You  buy  by  check  on  Hampden  National  Bank  a  New  York 
draft  for  $609.75.    Remit  it  to  Asa  Munson,  to  apply  on  account. 
The  bank  charges  $1  exchange  on  the  draft. 

9.  J.  D.  Burrill  sends  you  a  sight  draft  on  C.  E.  Dennison,  to 
apply  on  account,  $235. 

10.  You  hold  D.  Hanna's  note  for  $650,  and  the  note  is  due 
to-day,  with  interest  for  93  days.     He  pays  both  the  note  and 
interest  in  cash. 

11.  Daniel  W.  Campton  holds  your  note  for  $975.60.    The  note, 
with  77  days'  interest,  is  due  to-day.     Pay  the  same  in  cash. 

12.  You  hold  David  Creig's  interest-bearing  note  for  $560. 
The  note  has  run  for  48  days ;  you  discount  it  at  the  bank  and 
receive  credit  for  the  proceeds.     The  note  has  yet  45  days  to  run. 

20.  In  this  morning's  mail  you  receive  a  sight  draft  drawn  on 
you  by  J.  W.  Mason,  in  his  own  favor  for  $210.  Pay  the  draft 
by  check. 

24.  You  have  been  absent  from  the  city  and  on  your  return 
find  that  your  note  for  $500,  held  by  James  Larkin,  due  on  the 
22d,  has  been  protested  for  non-payment.  The  note  was  payable 
at  the  City  National  Bank.  Pay  the  note,  with  interest  added 
for  92  days,  and  protest  fees  amounting  to  $1.25. 

30.  Pay  the  City  Carting  Company  $106.24  for  freight  and 
drayage. 

31.  Pay  monthly  salaries  amounting  to  $235. 


JOURNALIZING— BANK  AND   PERSONAL   DRAFTS     29 

EXERCISE   XXI 
JOURNALIZING  —  BANK  AND   PERSONAL  DRAFTS 

June  1.  Sell  Daniel  Ames  merchandise  amounting  to  $1876.50. 
Receive  in  payment  the  following :  cash,  $650  ;  his  10-day  note,  in 
your  favor,  $450 ;  R.  M.  Kurd's  note,  in  favor  of  Ames,  for 
indorsed  to  you ;  his  check  for  the  balance. 

2.  Sell    George    Cannon    merchandise    amounting    to 
Receive  in  payment  the  following :    his  note   at   3   months,  on 
interest,  $375;    his  check  for  $200;    his  sight  draft  on  Albert 
Hatch  for  the  balance. 

3.  Buy  of  Samuel  Eaton  merchandise  amounting  to  $578.90. 
Give  in  payment  the  following  :  the  check  and  sight  draft  received 
of  George  Cannon  (see  transaction  above),  and  your  check  for  the 
balance. 

4.  W.  M.  Briton  presents  a  draft  drawn  by  A.  L.  Hunter  on 
you,  at  sight,  for  $238.17.     Pay  the  draft  by  check. 

5.  Pay  your  note  due  to-day,  in  favor  of  A.  S.  Murphy,  for 
$985.50,  as  follows :  check  for  $385.50  ;  X.  H.  Woodford's  accept- 
ance, less  60  days'  discount,  $300;  balance  in  cash. 

6.  Sell    F.    H.    Starrett   merchandise    amounting   to   $2165. 
Receive  payment  as  follows :  note  of  NT.  E.  Huntress,  in  favor  of 
Starrett,  for  $1000;    interest  accrued  on  the  note,  $16.75;    his 
check  for  $600  ;  balance  on  account. 

7.  Discount  R.  B.  Young's  acceptance  at  First  NTational  Bank  ; 
face  of  acceptance,  $326.90;  discount  allowed  for  72  days;  pro- 
ceeds left  on  deposit  in  the  bank. 

8.  Buy  of  J.  K.  Gray  merchandise  amounting  to  $432,  and 
accept  his  30-day  draft  in  payment  of  same. 

9.  Sell  Alfred  Stowe  merchandise  amounting  to  $83.45,  and 
receive  a  New  York  draft  in  payment  of  same. 

10.  Buy  merchandise  of  Frederick  Seton  amounting  to  $567.54, 
and  pay  for  same  by  a  sight  draft  on  Gray  &  Son  for  $200,  and 
your  check  for  the  balance. 

11.  Receive  from  C.  E.  Rowe  a  bank  draft  for  $90,  on  account. 


30  TEACHER'S   MANUAL 

12.  David  Bennett  owes  you  on  account,  $140.60.  He  has 
failed  in  business  and  is  able  to  pay  but  40^  on  the  dollar. 
Receive  cash  for  settlement  on  the  above  basis.  (Make  a  ledger 
account  with  Bennett  and  close  the  same.) 

NOTE. — After  journalizing  the  above,  enter  all  cash  items  in  the 
cash  book. 

EXERCISE  XXII 
JOURNALIZING  —  MISCELLANEOUS 

July  1.  Receive  cash  of  James  Brown  for  his  note,  due  to-day, 
and  interest  on  same  for  93  days.  Face  of  note,  $1500. 

2.  Prepay  my  note,  in  favor  of  Johnson  &  Co.,,  less  26  days' 
discount.     Face  of  note,  $150. 

3.  Pay  my  note,  in  favor  of  E.  Felton,  due  to-day,  in  cash. 
Face  of  note,  $600  ;  interest  accrued  for  37  days. 

4.  Buy  of  James  Powers  1000  bu.  wheat  at  66f^,  paying  cash 
for  one-half  the  amount  and  the  balance  on  account. 

5.  Give  James  Snell  your  note  at  60  days,  with  interest,  for 
rent  of  store  for  one  month,  $60. 

6.  Thomas   Fleming   gives   you  his  note  at  60  days,  with 
interest,  in  full  of  account,  $750. 

7.  Horace   Mann    draws  a  sight  draft  on  you,  in  favor  of 
Charles  Anson,  for  $345.     You  pay  the  same  by  check. 

8.  Buy  of  A.  W.  Haley,  1200  bu.  corn  at  42^,  and  accept  his 
draft  at  30  days  in  payment  of  same. 

9.  Sell  S.  B.  Clark  2000  bu.  wheat  at  72^,  and  receive  payment 
as  follows  :  his  check  for  $725  ;  cash,  $275  ;  balance  on  account. 

10.  Pay  Austin  &  Brown  for  invoice  of  $346,  less  2%,  by  check. 

11.  Give  C.  T.  Coleman  your  note  at  90  days,  with  interest,  in 
full  of  account,  $452. 

12.  You  discount  S.  Daniels'  note  at  the  bank;  face  of  note, 
$350;  discount  is  allowed  for  66  days;  proceeds  are  paid  to  you 
in  cash. 

13.  S.  B.  Clark  gives  you  his  note  at  60  days,  with  interest, 
for  the  balance  due  on  invoice,  $440. 


COMPOUND   ENTRIES  31 

14.  Give  James  Powers  your  note  at  30  days,  with  interest, 
for  the  balance  due  on  invoice,  $333.33. 

NOTE.  —  In  the  use  of  the  above  exercise  all  cash  items  may  be 
placed  in  the  cash  book,  and  all  others  journalized.  After  placing 
the  cash  items  in  the  cash  book,  journalize  them  as  an  additional  exer- 
cise. All  the  items  may  then  be  placed  in  the  cash  book,  the  cash 
book  closed,  and  the  balance  compared  with  the  results,  when  only 
the  cash  items  were  entered.  The  two  balances  should  be  the  same, 
but  the  total  footings  should  be  different. 

EXERCISE  XXIII 

COMPOUND   ENTRIES,    AND   QUESTIONS   ON 
BANK  DRAFTS 

August  1.  W.  R.  Sell  settles  his  account  with  you  in  full,  as 
follows  :  balance  of  account,  $180,  and  interest  on  the  same  for 
36  days.  He  gives  you  his  note  at  30  days,  with  interest,  for  $100, 
and  the  balance  in  cash. 

2.  Pay  your  note,  in  favor  of  Waverly  &  Co.,  as  follows  :  face 
of  note,  $900  ;  interest  accrued  for  63  days.     Give  your  check  for 
$350  ;  H.  Taylor's  acceptance  for  $400,  less  30  days'  discount ; 
balance  in  cash. 

3.  Sell  Henry  David  your  warehouse  for  $6000.     Receive  in 
payment  his  10-day  draft  on  Clay  &  Co.,  for  $4000,  Clay  &  Co. 
accepting   the   draft;   his  personal  note  for  $1000;   balance  in 
cash. 

4.  Sell  Buell  &  Co.  merchandise  amounting  to  $2000.     Pay- 
ment is  made  as  follows  :  Gove  &  Co.'s  note,  in  favor  of  Buell  & 
Co.,  for  $1000,  Buell  &  Co.  indorsing  the  note;  interest  accrued 
on  Gove  &  Co.'s  note,  $16.50;  their  check  for  $500;  balance  on 
account. 

5.  Sell  Jones  &  Co.  1000  bu.  corn  at  45^,  and  receive  in  pay- 
ment your  note  which  they  held. 

6.  Sell  French  &  Co.  2000  bu.  oats  at  37  p.     In  payment  they 
give  you  their  check  for  $400,  and  their  order  on  Curr  &  Co., 
payable  in  money,  in  10  days,  for  the  balance. 


32  TEACHER'S   MANUAL 

7.  Sell  a  team  of  horses  to  Carlson  &  Co.  for  $325,  and  receive 
in  payment  their  sight  draft  on  Hudson  &  Co.  for  that  amount. 

NOTE.  — Journalize  each  of  the  above  items. 

QUESTIONS 

You  buy  a  New  York  draft  at  First  National  Bank,  New 
Haven,  Conn.,  drawn  on  Chemical  Bank  of  New  York,  and  send 
the  draft  to  Hall  &  Son,  Alton,  111.  How  will  the  draft  reach  the 
Chemical  Bank  in  New  York? 

Why  is  it  that  the  First  National  Bank  of  New  Haven,  Conn., 
can  draw  drafts  on  the  Chemical  Bank  in  New  York? 

Give  a  clear  distinction  between  a  bank  draft  and  a  personal 
draft. 

If  you  were  a  stranger  in  New  York  and  wished  to  open  an 
account  with  the  Second  National  Bank  in  that  city,  how  would 
you  proceed  ? 

EXERCISE   XXIV 
JOURNALIZING  —  MISCELLANEOUS 

September  1.  R.  L.  Weston  owes  you  $286.40,  and  interest 
accrued  oil  same  amounts  to  $12.60.  He  has  failed  in  business  and 
is  able  to  pay  creditors  only  50^  on  the  dollar.  You  settle  with  him 
on  the  basis  named.  He  gives  you  a  note  at  90  days,  with  interest, 
for  $100,  and  cash  for  the  balance.  The  note  is  indorsed  by 
Thomas  Fulton.  (Open  and  close  his  ledger  account.) 

2.  Sell   Abram    Carson   merchandise    amounting   to    $986.50. 
Receive  payment  as  follows  :  your  acceptance,  which  he  held  for 
$644,  less  69  days*  discount ;  his  check  for  the  balance. 

3.  You  exchange  a  farm  valued  at  $4000  for  three  city  lots 
valued  at  $10,000.    The  difference  is  paid  as  follows  :  your  check 
for  $2000  ;  your  60-day  draft  on  Frank  McCall  for  $1500,  less  60 
days'  discount ;  a  first  mortgage  on  the  city  lots  for  the  balance. 

5.  Your  note,  in  favor  of  E.  A.  Heald  for  $900,  and  interest 
thereon  amounting  to  $20,  is  due  to-day  and  payable  at  the  Union 


INVENTORIES  33 

Bank.  In  order  to  meet  the  note  and  interest  you  discount  at 
Union  Bank  Isaac  Shaw's  note  for  $1200,  which  you  hold;  you 
allow  discount  on  Shaw's  note  for  100  days.  After  paying  the 
note  the  Union  Bank  places  the  balance  to  your  credit.  Jour- 
nalize and  show  how  much  is  on  deposit  to  your  credit  at  the 
Union  Bank. 

7.  James  Suydam  informs  you  that  he  will  be  unable  to  meet 
his  note  of  $640,  in  your  favor,  which  matures  to-morrow.     You 
accept  the  following  offer :  he  gives  you  a  new  note  for  $640,  with 
interest,  as  a  renewal  of  the  old  note ;  and  the  interest  on  the  old 
note,  $10.20,  he  pays  in  cash. 

8.  Buy  of  William  Rose  merchandise  amounting  to  $1640. 
Pay  for  same  as  follows  :  your  30-day  draft  for  $600,  less  30  days' 
discount ;  Harry  Rad way's  note  for  $500,  upon  which  interest  has 
accrued  amounting  to  $9.50 ;  your  check  for  $400 ;   balance  on 
account.     The  30-day  draft  is  drawn  on  Hiram  B.  Murray. 

9.  John  Brown  has  drawn  a  60-day  draft  on  you  for  $840,  in 
favor  of  William  Gordon.     Instead  of  accepting  the  same  you 
prepay  the  draft  less  the  60  days'  discount,  as  follows:  your  check 
for  $425 ;  a  sight  draft  on  Ezra  Walsh  for  the  balance. 


EXERCISE    XXV 

INVENTORIES 

The  subject  of  inventories  is  an  extensive  one,  and  the  fol- 
lowing suggestions  will  indicate  to  the  teacher  just  how  to  pro- 
ceed to  both  interest  and  instruct  his  class  in  this  important 
subject. 

MERCHANDISE  INVENTORIES  —  RESOURCE 

Merchandise  on  hand  is  the  most  common  form  of  inventory 
in  a  business  where  merchandise  is  handled. 

1.  How  does  a  merchant  ascertain  just  what  quantity  of  goods 
he  has  on  hand  ? 

2.  At  what  price  is  this  quantity  valued? 


34  TEACHEE'S   MANUAL 

3.  If  holiday  goods  were  inventoried  early  in  December,  at  what 
price  would  they  be  valued  ?     Would  the  price  or  estimate  change 
if  -these  same  goods  were  inventoried  late  in  January  ? 

4.  Under  what  conditions  would  merchandise  be  estimated  at 
more  than  cost  value  ? 

5.  Under  what  conditions  would  it  be  estimated  at  less  than 
cost? 

6*  If  an  inventory  is  too  high,  what  effect  does  it  have  upon 
the  business  statement?  Why? 

7.  If  an  inventory  is  too  low,  what  effect  does  it  have  upon  the 
business  statement  ?  Why  ? 

LIABILITY  INVENTORIES  AND  MISCELLANEOUS  DRILLS 

A  very  common  form  of  liability  inventory  for  merchandise  is 
an  unpaid  freight  bill. 

1.  Why  is  such  an  unpaid  freight  bill  a  liability  inventory? 

2.  How  would  such  an  inventory  be  entered  in  the  Merchandise 
account  when  the  books  were  closed  ? 

3.  How   does    a    liability   inventory   affect    the    Merchandise 
account  ?     Why  ? 

The  writer  has  known  of  several  business  houses  where  all 
invoices  of  merchandise  bought  were  simply  placed  on  file  and 
not  entered  in  the  regular  books  until  they  were  paid.  Under 
such  conditions  all  unpaid  invoices  at  the  time  of  closing  the 
books  would  be  a  liability  inventory.  Why  ? 

The  teacher  will  find  it  an  interesting  exercise  to  have  the  class 
make  up  a  short  merchandise  account,  enter  both  resource  and 
liability  inventories,  and  then  close  the  account.  Analyze  the 
account  both  before  and  after  closing. 

The  teacher  may  give  notes  of  introduction  to  several  members 
of  his  class,  to  leading  merchants  or  manufacturers  of  the 
community,  and  ask  them  to  call  and  get  specific  information 
regarding  the  taking  of  inventories,  the  information  thus  obtained 
to  be  reported  to  the  class.  This  is  far  more  helpful  to  the  class 
than  for  the  teacher  to  do  all  the  work  of  collecting  information 
himself. 


INVENTORIES  35 

In  all  the  above  work  the  use  of  the  Merchandise  account  is 
invaluable  as  an  aid  to  both  the  interest  and  instruction  of  the 
class. 

The  teacher  should  prepare  a  classified  merchandise  account 
and  have  the  class  enter  the  inventories  in  the  various  classified 
accounts,  each  classified  account  to  be  closed  into  the  general 
Merchandise  account. 

4.  Close  the  Merchandise  account,  as  given  in  Exercise  37, 
using  both  inventories. 

5.  Close  the  account,  using  only  the  resource  inventory. 

6.  Close  the  account,  using  only  the  liability  inventory. 

7.  Close  the  account,  using  only  the  debit  and  credit  items, 
both  inventories  being  omitted. 

8.  Compare  the  net  result  of  each  closing  with  the  net  results 
of  each  of  the  other  closings. 

9.  These  comparisons  bring  out  striking  differences ;  the  class 
should  make  a  written  outline  of  the  differences  noted. 

10.  Discover  the  reason  for  each  difference  outlined ;  discuss 
freely.     Be  sure  that  all  points  are  clearly  understood. 

11.  What  effect  does  each  result  of  the  different  closings  have 
upon  the  proprietor's  account  ?     Why  ? 

12.  Close  the  Expense  account,  as  given  in  Exercise  36,  using 
both  inventories. 

13.  Close  the  account,  using  only  the  resource  inventory. 

14.  Close  the  account,  using  only  the  liability  inventory. 

15.  Close  the  account,  using  neither  inventory. 

16.  Note  the  difference  in  the  net  results  obtained,  and  discuss 
the  reasons  for  all  differences  noted,  following  the  plan  suggested 
for  the  Merchandise  account. 

17.  Close  the  account  of  James  H.  Harlan,  as  suggested  in 
Exercise  37. 

18.  Why  does  this  account  show  a  loss  ? 

19.  Personal   accounts   usually  belong   to   the   resource   and 
liability  class  of  accounts.     To  which  class  does  this  account 
belong?     Why? 

20.  What  effect  does  the  closing  of  an  ordinary  personal  account 
have  upon  the  proprietor's  account  ? 


36  TEACHER'S   MANUAL 

21.    What  effect  does  the  closing  of  the  account  of  James  H. 
Harlan  have  upon  the  proprietor's  account  ?     Why  ? 
*  22.   Open  an  account  with  interest  and  discount,  as  follows : 

Dr.  Cr. 

$23.45  $18.50 

7.85  11.05 

12.65  2.03 

23.  Interest  and  discount  inventory,  resource,  $13.52. 

24.  Interest  and  discount  inventory,  liability,  $18.35. 

(For  explanation  of  interest  and  discount  inventories,  see  the 
latter  part  of  this  exercise.) 

25.  Close  the  above  account,  using  both  inventories. 

26.  Close  the  account,  using  only  the  resource  inventory. 

27.  Close  the  account,  using  only  the  liability  inventory. 

28.  Close  the  account,  omitting  both  inventories. 

29.  Note  carefully  the  differences  obtained  in  the  net  results. 

30.  Discuss  the  reasons  for  all  differences  noted. 

31.  Note  the  effect  of  each  different  closing  upon  the  pro- 
prietor's account,  and  the  reason  therefor. 

NOTE.  — A  great  variety  of  work  may  be  obtained  by  the  teacher 
for  his  class  in  the  use  of  Exercise  37.  For  instance,  close  the  Mer- 
chandise account  in  each  of  the  ways  suggested,  and  also  one  of  the 
other  accounts,  transferring  the  results  to  the  Loss  and  Gain  account, 
and  then  to  the  proprietor's  account. 

Before  concluding  the  exercise,  the  student  should  open  an  account 
on  a  ledger  page  with  each  account  given  in  the  exercise,  and  close 
them  as  directed.  If  he  is  able  to  do  this  he  has  a  good  understand- 
ing of  some  of  the  technical  features  involved  in  the  closing  of  a  ledger. 

EXPENSE  INVENTORIES 

1.  The  student  should  decide  whether  the  following  are  resource 
or  liability  inventories : 

a.  An  office  safe  on  hand  valued  at  $67.50. 

b.  An  unpaid  stationery  bill  amounting  to  $18.65. 

c.  Unpaid  rent  amounting  to  $45,  due  from  the  business. 

d.  Office  books  and  office  stationery  on  hand  valued  at  $32. 


INVENTOKIES  37 

e.  Unpaid  salaries  amounting  to  $72.50. 

f.  A  quantity  of  coal  valued  at  $28.45. 

g.  An  unpaid  gas  bill  amounting  to  $6.80. 

h.  An  unpaid  telephone  bill  amounting  to  $7.45. 

1.  An  insurance  policy,  the  unearned  premium  of  which  is 
worth  $37.60. 

The  above  inventories  may  be  used  as  follows  for  a  class 
exercise : 

2.  Create  an  expense   account   and  enter  one   of   the  above 
resource  inventories,  closing  the  account. 

3.  What  effect  does  a  resource  inventory  have  on  the  Expense 
account  ?     Why  ? 

4.  Create  an  expense  account  and  enter  one  of  the  liability 
inventories,  closing  the  account. 

5.  What  effect  does  a  liability  inventory  have  on  the  Expense 
account?     Why? 

6.  Create  an  expense  account,  and  enter  both  a  resource  and 
a  liability  inventory,  closing  the  account. 

INTEREST  INVENTORIES 

All  interest-bearing  notes  on  hand  or  outstanding  when  a  state- 
ment of  the  business  is  made,  require  an  interest  inventory  as  a 
means  of  ascertaining  the  exact  value  of  the  business.  The 
interest  accrued  on  bills  receivable  represents  a  resource  inven- 
tory; the  interest  accrued  on  bills  payable  represents  a  liability 
inventory. 

1.  The  student  will  find  the  interest  inventory  on  the  follow- 
ing bills  receivable : 

a.  A  note  for  $620  that  has  run  for  3  months  and  20  days. 

b.  A  note  for  $56.75  that  has  run  for  5  months. 

c.  A  note  for  $326  that  has  run  for  84  days. 

d.  A  note  for  $575  that  has  run  for  7  months  and  7  days. 

e.  A  note  for  $1000  that  has  run  for  9  months  and  8  days. 
/.  A  note  for  $237.54  that  has  run  for  8  months  and  3  days. 

2.  Is  the  interest  just  obtained  a  resource  or  a  liability  inven- 
tory?    Why? 


38  TEACHER'S   MANUAL 

3.  Create  an  interest  account  and  enter  the  above  inventory, 
closing  the  account. 

4.  What  effect  does  the  inventory  used  have  upon  the  Interest 
account?     Why? 

5.  If  the  above  inventory  was  omitted  when  a  business  state- 
ment was  made,  what  effect  would  it  have  upon  the  results  shown 
by  the  statement  ?     Why  ? 

6.  If  the  above  inventory  was  used  when  a  business  state- 
ment was  made,  what  effect  would  it  have  upon  the  results  shown 
by  the  business?     Why? 

7.  The  student  will  find  the  interest  inventory  on  the  follow- 
ing bills  payable : 

a.  A  note  for  $453.25  that  has  run  for  2  months  and  13  days. 

b.  A  note  for  $747  that  has  run  for  4  months. 

c.  A  note  for  $87.60  that  has  run  for  6  months  and  23  days. 

d.  A  note  for  $912.15  that  has  run  for  7  months  and  11  days. 

8.  Is  the  interest  just  obtained  a  resource  or  a  liability  inven- 
tory?   Why? 

9.  Create  an  interest  account  and  enter  the  above  inventory, 
closing  the  .account. 

10.  What  effect  does  this  inventory  have  upon  the  Interest 
account?    Why? 

11.  If  the  above  inventory  was  omitted  when  a  business  state- 
ment was  made,  what  effect  would  it  have  upon  the  results  shown 
by  the  statement  ?    Why  ? 

12.  If  the  above  inventory  was  used  when  a  business  state- 
ment was  made,  what  effect  would  it  have  upon  the  results  shown 
by  the  statement  ?     Why  ? 

13.  Create  an  interest  account  and  enter  both  the  interest 
inventories,  closing  the  account. 

DISCOUNT  INVENTORIES 

All  notes  on  hand  or  outstanding  that  are  not  interest-bearing 
require  that  discount  should  be  reckoned  for  the  time  the  notes  have 
yet  to  run,  in  order  that  a  correct  result  may  be  obtained  in  the 
statement.  The  discount  thus  obtained  is  a  discount  inventory. 


INVENTORIES  39 

The  discount  on  bills  receivable  is  a  liability  inventory,  and  the 
discount  on  bills  payable  is  a  resource  inventory. 

1.  The  student  will  find  the  discount  inventory  on  the  follow- 
ing bills  receivable : 

a.  A  note  for  $620  that  has  yet  3  months  to  run. 

b.  A  note  for  $565  that  has  yet  89  days  to  run. 

c.  A  note  for  $98.45  that  has  yet  5  months  to  run. 

2.  Is  the  above  inventory  a  resource  or  a  liability?    Why? 

3.  Create  a  discount  account  and  enter  the  above  inventory, 
closing  the  account  ? 

4.  What  effect  does  this  inventory  have  upon  the  Discount 
account?     Why? 

5.  The  student  will  find  the  discount  inventory  on  the  follow- 
ing bills  payable : 

a.  A  note  for  $435  that  has  yet  4  months  and  6  days  to  run. 

b.  A  note  for  $368  that  has  yet  6  months  to  run. 

c.  A  note  for  $875  that  has  yet  9  months  to  run. 

6.  Is  the  above  inventory  a  resource  or  a  liability?    Why? 

7.  Create  a  discount  account  and  enter  the  above  inventory, 
closing  the  account. 

8.  What  effect  does  this  inventory  have  upon  the  Discount 
account?     Why? 

9.  Create  a  discount  account  and  enter  both  of  the  above 
inventories,  closing  the  account. 

10.  If  the  above  inventories  were  omitted  when  the  business 
statement  was  made,  what  effect  would  it  have  upon  the  results 
shown  by  the  statement?  Why? 

DOUBTFUL  ACCOUNTS 

Another  form  of  discount  inventory  is  the  estimate  that  is 
made  for  losses  on  accounts  receivable.  The  teacher  will  illustrate. 

From  time  to  time  there  collects  on  the  books  of  merchants  a 
class  of  accounts  known  as  doubtful  accounts.  Such  accounts  are 
with  persons  from  whom  full  collections  are  not  likely  to  be  made. 
These  accounts  may  be  grouped  together  and  an  estimate  made 
as  to  their  probable  value,  such  an  estimate  being  treated  as  an 


40  TEACHER'S   MANUAL 

inventory.     By  using  a  number  of  personal  accounts,  the  use  of 
such  an  inventory  may  be  clearly  illustrated. 
*  1.    If  doubtful  accounts  are  inventoried,  is  the  inventory  a 
resource  or  a  liability  ?     Why  ? 

2.  If  such  an  inventory  is  used,  what  is  the  effect  upon  the 
results  shown  by  the  business  statement?     Why? 

3.  Stocks  and  bonds  may  be  inventoried.     These  securities 
fluctuate  in  the  market,  and  they  should  be  inventoried  at  the 
current  market  price  when  the  business  statement  is  made. 

4.  Open  an  account  with  a  certain  kind  of  stock  either  at  par, 
or  below  par,  or  above  par.    Close  the  account  by  using  the  market 
price  as  a  means  of  finding  the  inventory.     Note  the  result. 

EXERCISE  XXVI 
A  REVIEW  SET 

SUGGESTIONS.  — Use  journal,  cash  book,  and  ledger. 

September  1.    John  Jones  commenced  business  with  the  follow- 
ing resources  and  liabilities : 

Resources 

Cash  $5700. 

Store  and  Lot  5500. 

Note  of  E.  C.  Hunter  2000. 

Interest  accrued  on  the  same  20. 

Merchandise  in  store  worth  10250. 

Liabilities 

Owes  W.  J.  Jenkins  &  Co.  on  account  $1250. 

Adam  Bros,  hold  a  mortgage  on  store  and  contents      3500. 
Interest  accrued  on  the  same  17.50 

2.  Sold  merchandise  worth  $1275  to  E.  M.  Spring.     Terms: 
3/10,  net  90  days. 

3.  Bought  a  farm  of  H.  S.  Scott  for  $8500.     Paid  cash,  $5500 ; 
assumed  payment  of  a  mortgage  on  the  farm,  $2000  ;  and  gave  an 
interest-bearing  note,  secured  by  a  second  mortgage,  for  the  balance. 


A  REVIEW  SET  41 

4.  Received  of  E.   C.   Hunter  his  check  for  $1021    and   an 
interest-bearing  note  for  $1000,  in  full  payment  of  his  old  note 
of  $2000  and  interest  to  date,  $21. 

5.  Gave  our  60-day  note  for  $1262.50  to  W.  J.  Jenkins  &  Co. 
to  balance  account  of  $1250,  now  due,  and  to  cover  interest  on 
same  to  maturity  of  debt. 

6.  Received  of  E.  M.  Spring  his  note  at  90  days  in  settlement 
of  account,  $1275.    Discounted  same  at  bank,  receiving  credit  for 
the  proceeds,  $1255.87. 

Post  the  above  entries  to  the  ledger  and  make  a  trial  balance. 

NOTE. — After  the  trial  balance  is  completed,  if  the  teacher  will 
supply  inventories,  both  a  balance  sheet  and  a  business  statement  can 
be  made.  Vary  the  amounts  given  to  different  members  of  the  class 
and  compare  the  results,  and  give  the  reasons  therefor. 

EXERCISE  XXVII 
A  REVIEW  SET 

James  Worley  began  business  with  the  following  resources  and 
liabilities : 

Resources 

Store  Building  and  Lot  $4250. 

Cash  in  Market  Bank  1750. 

Cash  in  safe  357.28 

Wilton  &  Co.'s  10-day  note,  dated  July  28  658.50 

Liabilities 

Account,  in  favor  of  John  R.  Steeves  $450. 
Note,  in  favor  of  E.  P.  Coleman,  dated  July  20, 

due  60  days  after  date  1893.75 
Interest,  accrued  at  6%  to  date  4.10 

August  4.  Bought  with  check  10  shares  Union  Bank  stock  at 
69  (par  value  100). 

6.  Bought  of  Davis  Bros,  merchandise  worth  $3000.  Gave  in 
payment  check  for  $400,  balance  on  account. 


42  TEACHER'S   MANUAL 

7.  Wilton  &  Co.'s  note  for  $658,  mentioned  in  resources,  has 
been  protested  for  non-payment.  Protest  fee,  $1.65. 

10.  Sold  J.  Burson  merchandise  valued  at  $2628.50.  Received 
in  payment  at  its  present  worth  my  note  for  $1893.75,  in  favor  of 
E.  P.  Coleman,  mentioned  in  liabilities,  present  worth  $1900.38 ; 
balance  on  account. 

12.  Drew  a  sight  draft  on  J.  Burson  for  $325  and  remitted 
it  to  Davis  Bros.,  on  account. 

13.  Sold  to  Amos  Smith  10  shares  Union  Bank  stock  at  71 
and  received  his  check  on  Union  Bank  for  amount. 

14.  Received  of  J.  Burson  on  account  his  draft  at  30  days'  sight 
on  E.  P.  Coleman  for  $560.     Presented  the  above  draft  for  accept- 
ance, and  Coleman  has  accepted  the  same  payable  at  Union  Bank. 

14.  Due  W.  H.  Lease  $50  salary  for  one-half  month.  Paid 
W.  H.  Lease  one-half  the  amount  due  him  in  cash. 

16.  Discounted  at  8%  my  note  for  $1800  given  for  60  days  at 
Union  Bank  and  received  credit  for  proceeds.  Discount,  $25.20. 

Enter  the  above  items  in  either  the  cash  book  or  journal,  post, 
and  make  a  trial  balance. 

NOTE. — After  the  trial  balance  is  completed,  if  the  teacher  will 
supply  inventories,  both  a  balance  sheet  and  a  business  statement  can 
be  made.  Vary  the  inventories  given  to  different  members  of  the 
class  and  have  the  results  compared. 

EXERCISE  XXVIII 
OPENING  ENTRIES  FOR  PARTNERS 

1.  If  you  were  in  business  and  admitted  Nelson  Burr  as  an 
equal  partner,  what  steps  must  be  taken  in  connection  with  your 
business  in  order  that  you  may  know  just  how  much  Burr  should 
invest  ? 

a.  If  he  made  a  cash  investment,  how  would  the  entry  be 
made? 

b.  If  he  invested  cash  and  real  estate,  what  entry  would  be 
made? 

c.  If  he  invested  cash  and  a  note,  what  entry  would  be  made  ? 


OPENING  ENTRIES  FOR  PARTNERS  43 

d.  If  he  gave  you  a  note  for  the  entire  amount  of  his  invest- 
ment, what  entry  would  be  made  ? 

e.  If  entirely  new  books  were  opened,  how  would  the  old  books 
be  closed  and  the  new  books  opened  ? 

2.  Henry  M.  Johnson  admits  you  as  an  equal  partner  in  his 
business.    A  statement  shows  the  following :  cash  on  hand,  $750  ; 
merchandise,  per  inventory,  $4780 ;  furniture  and  fixtures,  $220 ; 
accounts  receivable,  $2325;  accounts  payable,  $1136;  bills  receiv- 
able, $896 ;    discount  allowed  on  bills   receivable,  $6.84 ;   bills 
payable,  $612 ;  interest  accrued  on  bills  payable,  $5.08 ;  unpaid 
rent  amounts  to  $65 ;  5%  of  the  accounts  receivable  are  not  col- 
lectible ;  there  is  an  unpaid  freight  bill  of  $22.45.     The  good  will 
of   the  business  is  estimated  at  $1000.     You  purchase  a  half 
interest  in  the  business,  giving  Johnson  your  note,  indorsed  by 
S.  M.  Winn,  for  $1500,  for  one  year,  with  interest  at  5%,  and  cash 
for  the  balance  of  your  investment. 

a.  Make  a  statement  of  the  business,  showing  Johnson's  present 
worth. 

b.  What  is  the  amount  of  your  investment,  and  what  are  the 
proper  entries  for  the  same  ? 

c.  It  is  decided  to  open  an  entirely  new  set  of  books;  how 
would  the  old  books  be  closed  and  the  new  books  opened  ? 

3.  Provin,  Hasson  &  Little  begin  business  under  the  following 
conditions :  capital,  $25,000,  of  which  sum  Provin  invests  $15,000 ; 
Hasson  invests  $6000,  and  Little  borrows  $4000   of  Provin  for 
the  purpose  of  investing  it,  each  partner  then  making  his  invest- 
ment in  cash.     What  is  the  proper  entry  for  the  above  when  they 
begin  business  ? 

4.  Pratt  &  Hardy  are  equal  partners.     They  decide  to  borrow 
$3000  in  cash  as  a  means  of  increasing  their  business,  giving  a 
real  estate  mortgage  as  security. 

a.  What  entry  would  be  made  when  the  money  was  borrowed  ? 

b.  If  the  money  borrowed  was  used  as  a  permanent  increase  of 
the  firm's  capital,  what  advance  would  have  to  be  made  by  the 
partners  when  the  mortgage  was  paid  ? 

c.  What  entries  would  be  made  when  the  mortgage  was  paid  ? 

d.  What  ledger  accounts  would  be  affected  ? 


44  TEACHER'S   MANUAL 

5.  Warren  Phelps  and  H.  M.  Brown  are  each  engaged  in  the 
dry  goods  business.     They  decide  to  unite  their  business  interests 
and  form  a  partnership.    Phelps  invests  cash,  $9000 ;  merchandise, 
$5280  ;  accounts  receivable,  $4235  ;  of  the  accounts  receivable,  5% 
are  not  collectible;  bills  receivable,  $1350;  interest  accrued  on 
bills  receivable,  $62.50.    Brown  invests  cash,  $4000  ;  merchandise, 
$3250  ;  accounts  receivable,  $2320  ;  10%  of  the  accounts  receivable 
are  not  collectible  ;  bills  receivable,  $650  ;  discount  allowed  on  bills 
receivable,  $8.90. 

a.  How  would  each  partner  close  the  books  of  his  old  business  ? 

b.  How  would  the  books  of  the  new  business  be  opened  ? 

6.  Horace  Duncan  and  Win.  Porter  begin  a  partnership  business 
under  the  following  conditions  : 

Mr.  Duncan  invests  $10,000  in  cash ;  Mr.  Porter  makes  no 
cash  investment,  as  he  is  without  capital,  but  is  especially  skilled 
in  the  details  of  the  business  undertaken.  Mr.  Porter  is  to  con- 
duct the  business  and  direct  all  its  affairs.  All  gains  realized  are 
to  be  divided  equally. 

a.  Name  some  things  that  should  be  noted  in  the  articles  of 
agreement  between  the  partners. 

b.  What  opening  entry  would  be  made  at  the  beginning  of  the 
business  ? 

c.  What  entries  would  be  recorded  in  Mr.  Duncan's  ledger 
account  ? 

d.  What   entries  would  be   recorded   in   Mr.  Porter's   ledger 
account  ? 

EXERCISE  XXIX 

CLOSING  ENTRIES  FOR  PARTNERS 

1.  Dewey  &  Clark  are  partners.  At  the  close  of  one  year's 
business  the  accounts  of  the  proprietors  were  as  follows: 

Dewey's  account:  Dr.^  $350;  Cr.,  $7500.  Clark's  account: 
Dr.,  $300 ;  Cr.,  $7500.  The  Loss  and  Gain  account  showed  the 
following  items:  merchandise,  gain,  $2356.70;  expense,  loss, 
$543.20  ;  interest,  loss,  $32.75  ;  discount,  gain,  $58.93  ;  collection 
and  exchange,  loss,  $6.12.  Close  the  Loss  and  Gain  account, 


CLOSING   ENTRIES   FOR   PARTNERS  45 

dividing  the  gains  equally,  and  then  show  the  present  worth  of 
each  proprietor. 

a.  Analyse  the  closing  of  these  accounts. 

b.  What  per  cent  of  the  total  investment  is  the  net  gain  ? 

c.  How  do  withdrawals  affect  present  worth  ?     Why  ? 

2.  Hart  &  Crowson  are  partners.     At  the  close  of  one  year's 
business  the  accounts  of  the  proprietors  were  as  follows : 

Hart's  account :  Dr.,  $250 ;  Cr.,  $5000.  Crowson's  account : 
Dr.,  $320 ;  Cr.,  $5000.  The  Loss  and  Gain  account  showed  the 
following  items  :  merchandise,  loss,  $2186.45  ;  expense,  loss,  $450  ; 
interest,  loss,  $56.25;  discount,  gain,  $84.50.  Close  the  Loss  and 
Gain  account,  dividing  the  losses  equally,  and  then  show  the 
present  worth  of  each  proprietor. 

a.  Analyze  each  account. 

b.  What  per  cent  of  the  total  investment  is  the  net  loss  ? 

c.  The  proprietors  are  worth  less  than  the  amount  shown  by 
the  net  loss.     Why? 

d.  What  two  things  diminish  the  proprietors'  present  worth  ? 

3.  Mitchell  &  Alden  entered  into  a  partnership,  beginning  busi- 
ness January  1,  1900.     Each  made  cash  investments,  Mitchell  of 
$5000,  and  Alden  of  $2500.     During  the  year  each  withdrew  as 
follows:  Mitchell's  withdrawals,  March  1,  $60;  Aug.  10,  $125 ; 
Oct.  25,  $100.     Alden's  withdrawals:    April  1,  $50;    Sept.  25, 
$80 ;  Nov.  12,  $75.     Open  an  account  with  each  proprietor  and 
enter  the  amounts  given. 

The  Loss  and  Gain  account  contained  the  following  items  at  the 
end  of  one  year:  merchandise,  gain,  $1387.54;  expense,  loss, 
$256.33;  interest,  loss,  $22.55  ;  discount,  gain,  $54.12  ;  collection 
and  exchange,  loss,  $11.34;  insurance,  loss,  $25;  office  fixtures, 
loss,  $13.75. 

The  partnership  agreement  provided  that  each  partner  should 
receive  interest  on  all  his  investments  and  should  pay  interest  on 
all  withdrawals.  Adjust  the  interest  account  between  the  part- 
ners, the  rate  of  interest  being  6  %.  This  interest  may  be  carried 
to  the  Loss  and  Gain  account,  but  a  better  way  is  to  adjust  the 
amount  by  making  a  journal  entry  and  posting  directly  to  the 
proprietors'  accounts. 


46  TEACHER'S   MANUAL 

After  adjusting  the  proprietors'  Interest  account,  close  the  Loss 
and  Gain  account,  dividing  the  gain  according  to  the  investment 
of  each  partner. 

4.  This  exercise  should  be  followed  by  a  careful  explanation  and 
full  discussion  of  the  adjustment  of  the  interest  between  partners 
when  both  investments  and  withdrawals  are  subject  to  interest. 

The  teacher  may  vary  the  above  exercise  by  opening  a  private 
account  with  each  proprietor,  as  well  as  an  investment  account, 
carrying  both  the  interest  items  and  the  net  gain  to  the  private 
accounts.  Discuss  the  value  of  the  private  account. 

5.  Dean  and  Lowell  were  partners.    Dean  invested  $1800,  and 
Lowell  $900.    In  the  course  of  the  first  year  Dean  withdrew  $400, 
and  Lowell  $600.     Open  an  account  with  each  partner  and  enter 
the  items  of  investment  and  withdrawal. 

The  Loss  and  Gain  account  showed  the  following :  merchandise, 
loss,  $843.50 ;  expense,  loss,  $236.58.  Close  the  Loss  and  Gain 
account,  dividing  the  loss  equally  between  the  partners. 

a.  What  is  the  net  result  shown  by  Dean's  account  ? 

b.  What  is  the  net  result  shown  by  Lowell's  account  ? 

c.  Why  is  there  such  a  marked  difference  between  the  results  ? 

d.  Where  there  are  two  partners  is  it  possible  for  one  of  them 
to  be  insolvent  and  the  other  solvent  ?     Why  ? 

6.  Ellis  and  Lee  were  partners.     Each  invested  cash,  ! 
During  the  first  year  of  the  business  each  partner  withdrew  I 
Open  an  account  with  each  partner  and  enter  the  investments 
and  withdrawals. 

At  the  end  of  the  first  year  their  losses  equaled  $18,425.60. 
Open  a  loss  and  gain  account,  enter  the  loss  item,  and  then 
close  the  account,  dividing  the  loss  equally  between  the  partners. 
After  entering  the  net  loss  in  each  partner's  account,  close  them. 

a.  What  is  the  net  result  shown  by  each  partner's  account  ? 

b.  In  this  connection  the  teacher  may  prepare  a  class  exercise 
on  insolvency  and  discuss  it  with  his  class. 

c.  If  an  insolvent  business  is  continued,  how  may  the  insolvency 
be  lessened  ? 

d.  If  an  insolvent  business  is  continued,  how  may  the  insolvency 
be  increased? 


INTERMEDIATE   TEST  47 

7.  In  closing  a  set  of  books,  if  one  partner  draws  a  salary,  the 
amount  of  his  salary  should  be  charged  to  the  expense  or  salary 
account  just  the  same  as  if  it  were  paid  to  a  person  outside  of  the 
firm.     The  writer  once  knew  of  a  partnership  being  dissolved 
chiefly  because  of  the  kind  of  entry  one  partner  made  for  himself 
in  payment  of  the  salary  he  received  as  bookkeeper.     He  simply 
charged  his  partner  and  credited  himself.     To  illustrate :  If  A's 
investment  was  $900,  and  B's  $900,  and  A  received  $75  per  month 
for  keeping  the  books  and  made  this  entry : 

B.  $75 

To  A  $75 

At  the  close  of  twelve  months  B's  account  would  balance  and  A 
would  have  all  the  investment. 

The  teacher  may  prepare  a  class  exercise  fully  illustrating  the 
above. 

8.  Smith  and  Wesson  are  engaged  in  business  as  equal  part- 
ners.    Wesson  wishes  to  retire  and  sells  his  entire  interest  to 
Smith,  receiving  cash  therefor. 

a.  What  necessary  steps  must  be  taken  before  the  partnership 
can  be  dissolved? 

b.  What  public  notice  of  dissolution  should  be  given  ? 

c.  What  entry  would  Smith  make  on  the  books  of  the  busi- 
ness, upon  paying  cash  for  Wesson's  interest  ? 

d.  What  change  would  be  made  in  the  ledger  ? 

e.  How  many  accounts  would  be  affected  ? 

/.  If  Smith  opened  new  books  when  Wesson  retired,  how  would 
the  old  books  be  closed  and  the  new  books  opened  ? 

EXERCISE  XXX 
INTERMEDIATE   TEST 

1.  What  is  the  acceptance  of  a  draft  ?     How  made  ? 

2.  What  are  the  uses  and  advantages  of  personal  drafts? 

3.  Apply  the  following  to  as  many  kinds  of  inventories  as  you 
can  think  of. 

Why  and  how  are  inventories  taken  ? 


48  TEACHER'S  MANUAL 

4.  What  is  the  advantage  of  keeping  money  in  a  bank  and  of 
making  payments  by  check  ? 

5.  What  is  a  check  stub,  and  what  are  its  uses  ? 

6.  How   do   you   determine   whether   an   account    shows   a 
resource  or  a  liability,  a  loss  or  a  gain  ? 

7.  What  is  the  chief  distinction  between  single  entry  and 
double  entry  f 

8.  Why  is  it  necessary  that  bills  receivable  and  bills  payable 
should  be  always  debited  and  credited  at  their  face  value  ? 

9.  How  is  your  answer  to  the  last  question  modified  if  a 
partial  payment  is  made? 

10.  There  are  some  errors  that  do  not  affect  the  equality  of 
the  ledger ;  mention  as  many  errors  of  that  kind  as  you  can. 

11.  Why  is  the  equality  of  the  ledger  not  affected  when  an 
account  is  closed  by  balance  ? 

12.  Why  does  the  proprietor  of  a  business  keep  an  account 
with  himself? 

13.  Name  the  uses  of  red  ink,  and  illustrate  each  use  named. 

14.  Why  does  a  bank  require  you  to  indorse  checks  when  you 
deposit  them  ? 

15.  Give  brief  answers  to  the  following : 

a.  Meaning  of  classes  of  accounts. 

b.  How  open  an  account  with  a  bank  ? 

c.  How  prove  a  check  book  ? 

16.  What  personal  habits  are  cultivated  by  the  study  of  book- 
keeping ? 


INTERMEDIATE   TEST  49 

EXERCISE   XXXI 
INTERMEDIATE   TEST 

1.  What   facts  are  disclosed  when   the  present  worth   of  a 
business  is  shown  ? 

2.  Under  what  conditions   does   a  business   man   make  an 
assignment  ? 

3.  When   the   assignment   is   made,  does  it  mean  that  the 
business  is  insolvent  ? 

4.  In  closing  a  set  of  books  is  it  absolutely  necessary  to  open 
a  loss  and  gain  account  ? 

5.  Would  the  Bills  Payable  account  under  any  circumstances 
ever  represent  a  gain  or  a  loss  ? 

6.  Would  the  Bills  Receivable  account  under  any  circum- 
stances ever  represent  a  gain  or  a  loss  ? 

7.  What  is  a  financial  statement,  and  what  facts  does  it  set 
forth? 

8.  What  is  a  statement  of  an  account?     When  issued,  and 
for  what  purpose  ? 

9.  Would  it  be  possible  to  close  the  Expense  account  by  a 
journal  entry? 

10.  Does  a  personal  account  ever  show  a  loss  ?     Illustrate. 

11.  What  is  meant  by  closing  the  ledger,  and  is  it  necessary  to 
close  all  accounts? 

12.  Under  what  circumstances  is  it  desirable  or  necessary  to 
close  a  personal  account  ? 

13.  Under  what  conditions  would  the  Cash  account  show  a 
liability? 

14.  Would  it  be  possible  for  the  Cash  account  to  show  a  loss  ? 

15.  What  is  the  relation  of  the  proprietor's  account  to  the 
business,  that  is,  is  it  a  resource  or  a  liability  ? 

16.  How  are  resources  and  liabilities  affected  when  a  gain  is 
made  ?  when  a  loss  is  sustained  ? 

17.  What  is  the  business  of  an  auditor? 

18.  How  is  his  work  done  ? 


50  TEACHEE'S   MANUAL 

19.  Tell  something  of  the  work  of  some  auditor  with  whose 
work  you  are  familiar. 

20.  Banks   require    identification    of    strangers.      How   is   a 
stranger  identified? 

21.  Is  it  possible  for  an  insolvent  business  to  be  continued? 
Why? 

22.  Why  do  we  keep  accounts  with  persons? 

23.  What  do  such  accounts  show? 


EXERCISE  XXXII 
INTEEMEDIATE   TEST 

1.  What  are  the  proper  heading  and  entry  in  a  journal  when 
a  man  begins  business  under  the  following  conditions  ?  (a)  when 
simply  an  investment  of  cash  is  made ;  (b)  when  there  is  a  series 
of  items  representing  several  different  resources. 

2.  What  does  the  proof  of  the  cash  book  prove? 

3.  How  is  cash  proved  when  there  is  cash  "over"  or  cash 
«  short "  ? 

4.  If  the  bank  account  were  overdrawn,  what  would  the  cash 
book  show  if  all  cash  were  on  deposit  ? 

5.  How  could  a  journal  entry  be  made  in  a  cash  book  ? 

6.  If  a  note  is  interest-bearing,  how  is  it  indicated  in  the  bill 
book? 

7.  How  do  you  prove  the  check  book  when  the  balance  differs 
from  the  balance  shown  by  the  pass  book  ? 

8.  What  journal  entry  does  the  proprietor  make  when  begin- 
ning business  under  the  following  conditions  ?  (a)  an  investment 
of  cash,  real  estate,  and  bills  receivable ;  (&)  an  investment  con- 
taining both  resources  and  liabilities ;  (c)  an  investment  when  he 
begins  business  without  capital  of  his  own,  having  borrowed  the 
money  to  start  in  business. 

9.  When  a  red   ink  entry  is  made  in  a  ledger,  what  is  the 
effect  on  the  equality  of  the  ledger?     Why? 

10.   Could  we  close  a  set  of  books  without  using  inventories  ? 


INTERMEDIATE   TEST  51 

11.  If  we  closed  the  books  without  using  the  inventories,  how 
would  the  results  affect  the  proprietor's  account  ?     Why  ? 

12.  After  closing  a  set  of   books,  how  would  the  ledger  be 
affected  if  no  inventories  were  brought  below  the  ruling  ? 

13.  How  do  we  find  an  interest  inventory? 

14.  When  is  an  interest  inventory  a  resource  ? 

15.  When  is  an  interest  inventory  a  liability  ? 

16.  When  does  a  business  have  a  discount  inventory  ? 

17.  How  are  discount  inventories  obtained? 

18.  When  is  a  discount  inventory  a  resource? 

19.  When  is  a  discount  inventory  a  liability  ? 


EXERCISE  XXXIII 
INTERMEDIATE   TEST 

1.  Under  what  conditions  would  the  Merchandise  account 
have  a  liability  inventory  ? 

2.  Is  it  possible  that  the  Merchandise  account  might  have 
both  a  resource  and  a  liability  inventory  ?     (Yes.     How?) 

3.  If  an  inventory  is  estimated  too  high,  what  effect  will  it 
have  on  the  business  statement?     Why? 

4.  Under  what  conditions  would  there  be  a  resource  inventory 
in  the  Expense  account  ? 

5.  Under  what  conditions  would  there  be  a  liability  inventory 
in  the  Expense  account  ? 

6.  If  the  trial  balance  shows  equal  debits  and  equal  credits 
and  yet  there  is  an  error,  how  is  such  error  likely  to  be  discovered  ? 

7.  How  is  the  trial  balance  affected  if  auxiliary  ledgers  are 
used? 

8.  What  important  facts  regarding  the   business  does  the 
resource  and  liability  statement  show  ? 

9.  What  important  facts   are   shown  by  the  loss  and  gain 
statement  ? 

10.   Do   the   statements   show   all  the   facts   relating   to   the 
business  ? 


52  TEACHER'S   MANUAL 

11.  Each  ledger  account  must  show  one  of  four  things ;  name 
them. 

12.  How  may  we   determine  whether   an   account   shows   a 
resource  or  a  liability,  a  loss  or  a  gain  ? 

13.  When  should  merchandise  on  hand  be  inventoried  either 
above  cost  or  below  cost  ?     Why  ? 

14.  Name  as  many  different  inventories  as  you  can  and  tell 
how  each  one  would  be  found  in  business. 

15.  If  an  error  is  made  in  estimating  the  amount  of  a  resource 
inventory,  what  effect  will  such  error  have  upon  the  results  shown 
by  the  business  statement  ? 

16.  If  an  item  were  posted  to  a  wrong  personal  account,  in  a  large 
business,  how  would  such  an  error  be  discovered  and  corrected  ? 

17.  What  is  the  effect  upon  the  business  if  resources  decrease 
and  liabilities  remain  the  same  ? 

18.  What  is  the  effect  upon  the  business  if  resources  increase 
and  the  liabilities  remain  unchanged? 

19.  What  is  the  effect  upon  the  business  if  liabilities  increase 
and  the  resources  remain  the  same  ? 

20.  What  is  the  effect  upon  the  business  if  liabilities  decrease 
and  the  resources  remain  the  same  ? 

21.  In  business  how  are  checks,  New  York  drafts,  and  sight 
drafts  treated?    If  the  above  were  included  in  a  deposit,  how 
would   the   bank   receiving   them   enter   them   to   your   credit? 
Would  they  be  regarded  as  cash? 

EXERCISE  XXXIV 
INTERMEDIATE   TEST 

1.  What  things  should  be  carefully  observed  when  you  receive 
a  check  ? 

2.  How  is  a  check  certified  ? 

3.  Under  what  conditions  will  a  bank  certify  a  check  ? 

4.  What  is  the  value  to  the  holder  of  certification  ? 

5.  In  what  ways  may  it  be  shown  that  a  note  is  not  interest- 
bearing  ? 


INTERMEDIATE   TEST  53 

6.  In  what  ways  may  it  be  shown  that  a  note  is  interest- 
bearing  ? 

7.  Who  is  originally  responsible  for  the  payment  of  a  note 
both  before  and  after  transfer  ? 

8.  Members  of  the  class  will  write  the  following : 

a.  A  note  without  interest.          c.    An  accommodation  note. 

b.  A  note  with  interest.  d.    A  joint  note. 
Each  of  the  above  should  be  freely  discussed. 

9.  When  is  a  note  protested?     Why  protested?     How  pro- 
tested? 

10.  When  a  business  is  insolvent,  has  the  proprietor  lost  all 
his  investment? 

11.  Is  it  possible  for  a  man  to  continue  an  insolvent  busi- 
ness ?     (Yes.) 

12.  If  an  insolvent  business  is  continued,  how  can  the  insol- 
vency be  lessened  or  overcome  ?    (By  the  business  showing  a  gain.) 

13.  If  an  insolvent  business  is  continued,  how  can  the  insol- 
vency be  increased  ?     (By  incurring  additional  losses.) 

14.  What  is  a  voucher  ?     Give  several  illustrations. 

15.  Under  what  circumstances  are  the  following  vouchers? 

a.  An  invoice.  c.    A  check. 

b.  A  note.  d.   A  sight  draft. 

16.  What  is  the  value  of  the  following? 

a.    A  canceled  check.  c.    A  receipt. 

6.    A  canceled  note.  d.    A  receipted  invoice. 

17.  Sometimes  a  check  is  written  payable   "to   order,"    and 
sometimes  payable  "to  bearer."     What  is   the   value   of   these 
different  forms  to  the  maker  of  the  check  ?    To  the  holder  of 
the  check? 

18.  How  is  a  bank  account  overdrawn  ?    Do  banks  allow  over- 
drafts ? 

19.  Under  what  conditions  would  the  following  show  a  loss? 

a.  A  personal  account.  c.    Bills  Receivable  account. 

b.  The  Cash  account.  d.    The  Merchandise  account. 


64  TEACHER'S  MANUAL 

EXERCISE  XXXV 
INTERMEDIATE   TEST 

1.  Is  the  proprietor's  account  a  resource  or  a  liability  to  the 
business  ?    Why  ? 

2.  Is  it  a  resource  or  a  liability  to  the  proprietor?     Why? 

3.  How  do  you  close  the  proprietor's  account  under  the  follow- 
ing conditions  ?  (a)  when  the  business  shows  a  net  gain ;  (b)  when 
the  business  shows  a  net  loss ;  (c)  when  the  business  is  insolvent. 

4.  Under  what  conditions  would  a  personal  account  show  a 
loss? 

5.  If  a  personal  account  shows  a  loss,  how  is  it  closed  ? 

6.  Under  what  two  general  accounts  may  all  personal  accounts 
be  included? 

7.  How  is  the  Merchandise  account  closed  when  there  is  both 
a  resource  and  a  liability  inventory  ? 

8.  Explain  fully  what  is  meant  by  negotiability  of  a  note  and 
responsibility  of  an  indorser. 

9.  Write  a  check  that  is  negotiable  and  a  promissory  note 
that  is  non-negotiable. 

10.  Of  what  does  protest  consist  ? 

11.  Under  what  conditions  should  a  note  be  protested? 

12.  Give  a  rule  for  debiting  and  crediting  interest,  bills  payable, 
persons,  and  commission. 

13.  Explain  how  a  double-entry  ledger  is  made  to  exhibit  the 
net  gain. 

14.  What  does  the  balance  of  the  proprietor's  account  show 
before  it  has  been  credited  with  the  net  gain?     What  does  the 
account  show  after  it  has  been  credited  with  the  net  gain  ? 

15.  Explain   how  worthless  accounts  are  treated.     How  are 
doubtful  accounts  treated? 

Define  the  following : 

Inventory  Consignment 

Shipment  Account  of  sales 

Invoice  Open  account 


CLOSING  THE   LEDGER  55 

16.  Define  the  following : 

Bill  of  exchange  Power  of  attorney 

Bill  of  lading  Bill 

17.  A  business  man  made  an  assignment,  and  after  closing  out 
his  business  and  paying  all  debts  the  assignee  had  left  a  balance 
of  $40,000.     Why  was  an  assignment  necessary? 

18.  Write  briefly  upon  the  advantages  of  classifying  the  Mer- 
chandise account. 

EXERCISE  XXXVI 
CLOSING  THE  LEDGER 

Open  an  account  with  the  Student  as  proprietor,  using  the 
following  items: 

Dr.  Cr. 

$255.  -    $5600. 

NOTE.  — The  teacher  should  supply  dates  and  pages  for  each  item. 

Open  an  account  with  Merchandise,  using  the  following  items : 

Dr.  Cr. 

$1543.25  $1164.20 

876.54  425.30 

1143.38  786.45 

587.50  1764.25 
1056. 
Merchandise  inventory,  $2156. 

Open  an  account  with  Expense,  using  the  following  items : 

Dr.  Cr. 

$132.  $45.65 

65. 
43.50 
38.10 
12.58 

Expense  inventory,  liability,  $76.40. 
Expense  inventory,  resource,  $98.60. 


56  TEACHEB'S   MANUAL 

Open  an  account  with  Office  Fixtures,  using  the  following  items : 

Dr. 

$225.50 
45.20 

Office  Fixtures  inventory,  $175. 

Open  an  account  with  Collection  and  Exchange,  using  the 
following  items : 

Dr. 

$1.65 

3.10 

.89 

.11 

The  above  may  be  used  as  a  test,  the  student  opening  a  loss 
and  gain  account  and  closing  all  the  accounts. 
The  following  is  suggested  for  a  class  exercise : 

1.  Analyze  each  of  the  above  accounts. 

2.  If  the  inventory  were  omitted  in  the  Merchandise  account, 
what  effect  would  it  have  upon  the  result  shown  by  the  account  ? 

3.  Close  the  Merchandise  account,  omitting  the  inventory. 

4.  Close  the  Expense  account,  omitting  the  resource  inventory. 

5.  Close  the  Expense  account,  omitting  the  liability  inventory. 

6.  Compare  the  net  results  of  the  Expense  account  after  the 
above  closings. 

7.  How  does  each  compare  with  the  net  result  shown  by  the 
account  when  both  inventories  were  used  ? 

8.  How  does  a  change  in  any  one  of  the  above  accounts  or 
inventories  affect  the  proprietor's  account  ?     Why  ? 

9.  Distinguish  between  the  Expense  account  and  the  Office 
Fixtures  account. 

10.    What  kind  of  business  transactions  give  rise  to  the  Collec- 
tion and  Exchange  account  ? 


CLOSING  THE   LEDGER  57 

EXERCISE  XXXVII 
CLOSING   THE   LEDGER 

Open  an  account  with  the  student   as  proprietor,  using  the 
following  items : 

Dr.  Cr. 

$210.  $5000. 

Open  an  account  with  Merchandise,  using  the  following  items : 

Dr.  Cr. 

$1486.25  $1120.33 

723.54  383.55 

1045.28  654.87 

476.52  1521.33 

993.28 

Merchandise  inventory,  resource,  $1946.53 
Merchandise  inventory,  liability,  185.43 
Open  an  account  with  Expense,  using  the  following  items : 

Dr.  Cr. 

$110.  $33.24 

54. 
23.50 
18.58 

Expense  inventory,  resource,  $86.75 
Expense  inventory,  liability,  13.48 
Office  Fixtures  may  be  opened  as  follows : 

Dr.  Cr. 

$186.25  $25. 

38.40 

Office  Fixtures  inventory,  $145. 

Open  an  account  with  Horse  and  Wagon,  using  the  following 
items : 

Dr.  Cr. 

$350.  $50. 

22.50 
Horse  and  Wagon  inventory,  $310. 


58  TEACHER'S   MANUAL 


Open  an  account  with  Insurance,  using  the  following  items : 

Dr. 

$65.40 
Insurance  inventory,  unexpired  premium,  $40. 

Open  an  account  with  James  H.  Harlan,  using  the  following 
items : 

Dr.  Cr. 

$65.25  $50. 

32. 
25.75 

As  Mr.  Harlan  has  failed  in  business,  the  proprietor  will  realize 
but  50/  on  the  dollar  on  the  balance  of  his  account,  cash  having 
been  received  for  that  portion  of  the  account.  Close  as  follows : 
credit  the  account  for  the  cash  received,  and  then  close  the 
remainder  to  the  Loss  and  Gain  account. 

NOTE. — If  a  class  has  been  carefully  drilled  on  the  principles 
involved  in  the  above  accounts,  the  exercise  may  be  used  as  a  test ; 
otherwise  class  drills  should  be  given  on  the  separate  accounts,  follow- 
ing the  suggestions  given  below. 

EXERCISE  XXXVIII 

CLOSING  THE   LEDGER 

SUGGESTIONS. — Dictate  the  following  accounts  to  be  written  on 
ledger  paper,  three  accounts  to  the  page,  and  closed  by  the  student. 
Supply  explanations  and  folios. 

William  Eldred,  Proprietor 

Dr.  Cr. 

June    1,  $200.  May     8,  $3000. 

Merchandise 

Dr.  Cr. 

June  30,      $4160.     June  30,      $3190. 


CLOSING  THE  LEDGER  59 

Expense 
Dr. 
June  30,  $760.50 

Real  Estate 

Dr. 

June    3,  $4000. 

Interest  and  Discount 

Dr.  Cr. 

June    8,  $7.60         June  12,  $20.40 

The  following  are  the  inventories  to  be  used  in  closing  the 
above  accounts : 

Merchandise  (resource) 

Stock  on  hand  per  schedule  "A"  $2100. 

Merchandise  (liability) 

Unpaid  freight  bill  39.40 

Expense  (resource) 

Office  safe  200. 

Expense  (liability) 

Unpaid  telephone  service          $10.50 

Unpaid  gas  bill  9.30  19.80 

Real  Estate  (resource) 

Estimated  value  of  store  property  4100.    - 

Real  Estate  (liability) 

Unpaid  taxes  200. 

Interest  and  Discount  (resource) 

Interest  accrued  on  bills  receivable  9 .40 

Interest  and  Discount  (liability) 

Interest  accrued  on  bills  payable  40.50 

Use  a  half  sheet  of  ledger  paper  for  the  above  exercise,  and  drill 
upon  the  principles  involved  until  the  student  can  readily  close 
accounts  having  resource  and  liability  inventories.  If  it  is  desired 
to  show  a  net  loss,  reduce  the  inventory  on  the  Merchandise  account 


60  TEACHER'S   MANUAL 

to  $500.     The  student  should  be  drilled  on  closing  loss  and  gain 
accounts  when  the  business  shows  a  net  loss. 

The  exercise  may  be  used  as  an  examination  test  or  for  any 
general  review  work. 

EXERCISE  XXXIX 

LOSS   AND   GAIN 

1.  A  begins  business  January  1,  with  the  cash  capital  $2500. 
At  the  close  of  the  year  his  net  insolvency  is  $500.    Eequired  the 
net  gain  or  loss. 

2.  B's  net  insolvency  January  1  is  $600.     At  the  close  of  the 
year  his  net  capital  is  $750.     Required  the  net  gain  or  loss. 

3.  C's  net  loss  for  one  year  is  $1240.     His  insolvency  at  the 
close  of  the  year  is  $240.    Required  the  net  capital  at  the  beginning. 

4.  D's  net  gain  for  one  year  is  $1940.     His  net  capital  at  the 
end  of  the  year  is  $1000.     Required  the  net  insolvency  at  the 
beginning  of  the  year. 

5.  E's  resources  January  1  were  $7000,  and  his  liabilities 
$6000.     At  the  close  of  the  year  his  resources  are  $6000,  and  his 
liabilities  $7000.     Required  the  net  gain  or  loss. 

6.  F's  resources  January  1  were  $4000,  and  his  liabilities  $5000. 
At  the  close  of  the  year  his  resources  are  $5000,  and  his  liabilities 
$4000.     Required  the  net  gain -or  loss. 

7.  G's  net  loss  at  the  close  of  one  year  is  $1250.     His  net 
insolvency  is  $250.     Required  his  net  capital  at  the  beginning. 

8.  H  &  Co.'s  net  investment  at  the  beginning  of  the  year  is 
$1800,  and  the  net  insolvency  at  the  close  $400.     A's  share  of 
loss  and  gain  is  to  B's  share  as  one  is  to  three.     Required  each 
man's  net  gain  or  net  loss. 

9.  The  net  insolvency  of  a  business  at  the  end  of  one  year  is 
$920,  the  net  loss  for  the  year  is  $1460.    Required  the  investment 
of  each  partner  if  they  share  the  gains  and  losses  according  to  net 
investments.    A's  investment  is  to  B's  investment  as  one  is  to  five. 

10.  J  began  business  January  1  with  $500,  borrowed  money. 
At  the  end  of  six  months,  outside  of  borrowed  capital,  his  net 
insolvency  is  found  to  be  $260.  Required  his  net  loss. 


BUSINESS   FORMS  — CHECKS  61 

11.  K's  net  gain  at  the  end  of  one  year  is  $1465.    If  his  capital 
is  found  to  be  $750,  what  was  the  condition  of  his  business  at  the 
beginning  of  the  year? 

12.  L's  net  loss  for  one  year  is  $6248,  his  net  insolvency  is 
$3000.     Required  his  net  investment. 

13.  M  began  business  with  a  bequest  of  $1500  from  a  friend. 
At  the  end  of  one  year  his  net  insolvency  is  $300.     What  is  his 
net  loss? 

14.  N's  investment  January  1  was  $1500.     Six  months  later 
he  made  an  additional  investment  of  $200.     At  the  close  of  the 
year  his  net  insolvency  is  $200.     What  is  his  net  loss? 

15.  O's  net  loss  at  the  end  of  a  year  is  $1290  ;  during  the  year 
he  made  an  additional  investment  of  $400.    If  his  net  insolvency 
at  the  end  of  the  year  is  $300,  what  was  his  net  investment  at  the 
beginning  of  the  year? 

EXERCISE  XL 
BUSINESS  FORMS  — CHECKS 

SUGGESTIONS.  —  The  following  outlines  may  be  used  to  give 
emphasis  to  special  forms  of  checks.  The  student  may  use  current 
dates. 

1.  Write  your  check  for  750  on  First  National  Bank,  in  favor 
of  William  Joiner  &  Co. 

2.  Write  your  check  on  Central  Bank,  in  favor  of  William 
Smith,  64  Grant  Ave.,  Chicago,  for  $92.56.     Write  the  check  so 
that  there  will  be  no  possible  chance  of  its  falling  into  the  hands 
of  the  wrong  Mr.  Smith. 

3.  Write  your  check  on  National  Bank  of  Redemption,  in 
favor  of  New  York  draft,  $500  ;  exchange  $1. 

4.  Write  your  check  on  Merchants  Bank  for  $512,  in  payment 
for  your  note,  protested  at  Colonial  Bank,  City,  yesterday.     Face 
of  note,  $500;  interest,  $10.50;  protest  fees,  $1.50. 

NOTE.  —  In  the  above  check  write  : 

Pay  to  the  order  of  Protested  Note  ($500),  interest  ($10.50), 
fees  ($1.50)-, 


62  TEACHER'S   MANUAL 

5.  Write  your  check  on  Merchants  Bank  in  payment  for  note 
due  to-day,  in  favor  of   Charles  Williams,  $750.     The  note  is 
made  payable  at  Merchants  Bank. 

NOTE.  — In  the  above  check  write  : 

Pay  to  the  order  of  Note,  favor  Charles  Williams,  $750. 

6.  Write  your  check  on  Merchants  Bank  for  $516.50,  which 
you  wish  to  use  for  the  weekly  pay  roll. 

NOTE.  — In  the  above  check  write : 

Pay  to  the  order  of  Pay  Roll,  $516.50. 

7.  Write  your  check  on  Merchants  Bank  for  $100,  which  you 
wish  to  appropriate  for  private  use. 

8.  Write   a    certified   check :    drawer,   your  name ;    drawee, 
Merchants  Bank  ;    payee,  Henry  Osgood  &  Co. 

9.  Write  a  cashier's  check  for  $175  on  First  National  Bank: 
cashier,  Charles  H.  Lapham. 

EXERCISE  XLI 

CHECKS  — SUGGESTIONS  FOR  DISCUSSION 

1.  A  check  dated  on  Sunday  is  not  void.     Why? 

2.  Checks  drawn  payable  to  "  bearer  "  should,  under  some  cir- 
cumstances, be  issued  in  preference  to  checks  drawn  payable  to 
"  order."     Explain. 

3.  Checks   drawn    for   remittance   purposes  should  never  be 
written  payable  to  bearer.     Why  ? 

4.  Banks  prefer  the  usual  prescribed  form  for  checks.     Would 
they  be  justified  in  refusing  to  pay  checks  drawn  up  (a)  in  the 
form  of  a  letter  ?  (&)  in  lead  pencil  ? 

5.  It  is  not  safe  to  draw  up  checks  as  shown  in  the  form 
on  page  63.     Why? 

6.  Banks  require  that  checks  payable  to  bearer  shall  be  indorsed 
before  they  are  cashed.     Is  this  necessary  ?     Why  ? 

7.  Is  it  ever  desirable  to  write  the  payee's  address  on  a  check  ? 
Explain. 

8.  Checks  are  usually  numbered.    Is  this  important  ?    Explain. 


CHECKS  — SUGGESTIONS  FOR  DISCUSSION  63 


{Boston,  ^Mass.t  cAov.  22,    19        Jfo. 

c/ fie   Ltnion 

to  the  order  of  <§. 

^Dollars 

-  ty  &o. 

per   (A}-.    <S. 


9.  Merchants  sometimes  exchange  checks.  Are  there  any 
advantages  to  result  to  the  merchants  from  this  practice  ?  Dis- 
advantages? What  do  banks  call  transactions  of  this  sort  ?  How 
are  banks  disposed  to  treat  customers  who  frequently  exchange 
checks?  Why? 

10.  A  check  has  been  issued  by  you  payable  to  the  order  of 
Charles  H.  Wentworth.    Mr.  Wentworth  notifies  you  that  he  has 
just  lost  it.     What  can  you  do  to  prevent  any  loss  of  money? 
Explain  fully. 

11.  The  holder  of  a  check  should  present  it  for  payment  with- 
out any  unnecessary  delay.     Why  ?     Give  three  good  reasons. 

12.  A  check  has  been  certified  and  subsequently  lost.     Can 
the  drawee  stop  the  payment  of  the  check  ?     Why  ? 

13.  You  receive  an  uncertified  check  of  Taylor  &  Co.  in  pay- 
ment of  the  balance  due  you  on  account.     Is  the  indebtedness 
canceled  ?     Explain. 

14.  A  note  made  by  you  is  to-day  due  and  payable  at  your 
bank.     You  write  a  check  in  settlement.     In  whose  favor  should 
the  check  be  drawn  ?     Explain. 

15.  You  wish  to  draw  money  from  your  bank  for  your  own 
account.     Explain  how  the  check  should  be  written. 

16.  A  bank  check  has  no  date.     Is  it  void?     Why? 

17.  A  check  is  dated  ahead  thirty  days.     Is  it  good?     Why? 
Why  are  checks  sometimes  dated  ahead? 


64  TEACHER'S   MANUAL 

18.  You  are  a  comparative  stranger  in  Boston.    You  receive  a 
check  for  $275,  and  desire  to  get  it  cashed.     You  call  upon  a 
business  acquaintance  and  ask  him  to  identify  you  at  his  bank, 
but  he  is  too  busy  to  do  so.     How  can  he  secure  for  you  the 
prompt  payment  of  the  check  without  accompanying  you  to  his 
bank  for  the  purpose  of  identification  ? 

19.  You  identify  Albert  Curtis  at  your  bank.     The  check  he 
presented  for  payment 'proves  to  be  worthless.     Are  you  respon- 
sible to  the  bank  ? 

20.  Give  a  definition  of  money. 

EXERCISE  XLII 
BUSINESS  FORMS  — DUE-BILLS 

SUGGESTIONS.  —  The  following  outline  may  be  used  to  show  how 
due-bills  are  employed  in  business. 

DEFINITIONS.  —  A  due-bill  is  a  written  acknowledgment  of  a  debt. 
It  may  be  payable  in  money  or  in  merchandise,  on  demand  or  at  any 
specified  time.  When  it  is  payable  in  money  it  has  the  nature  of  a 
note,  and  is  recorded  in  much  the  same  manner  as  a  note. 

As  a  due-bill  is  ordinarily  drawn  up  it  is  not  negotiable. 

Form  of  Due-Bill  payable  in  Money 


NOTE.  —  The  above  form  of  due-bill  is  not  very  common  in  business, 
as,  it  will  be  noted,  if  it  is  drawn  up  in  this  form  it  contains  all  the  con- 
ditions of  negotiability  and  may  pass  hands  by  ordinary  indorsement. 


BUSINESS   FORMS  —  DUE-BILLS  65 

Form  of  Due-Bill  payable  in  Merchandise 


90  {Boston,  ^Alciss.,   c/W.  /6,    19— 

IS.  T 


in  groceries  from  my  store. 


The  following  outlines  may  be  used  in  drilling  students  upon 
forms  of  due-bills. 

1.  Write  a  due -bill  in  favor  of  E.  M.  Delano,  a  carpenter,  who 
has  just  put  up  some  shelving  in  your  store,  valued  at  $20.    Make 
the  due-bill  payable  in  groceries  from  your  store. 

2.  Write  a  due-bill  for  $12.50,  in  favor  of  B.  E.  Valentine, 
payable  on  demand  in  groceries  from  your  store. 

3.  Write  a  due-bill  in  favor  of  F.  O.  Grey  for  country  produce 
purchased  of  him  to-day,  $7.96.     Make  the  due-bill  payable  on 
demand  in  groceries  from  your  store. 

4.  Write  a  due-bill  for  $11.50,  payable  in  money,  in  favor  of 
Charles  N.  Dutton.     Make  the  due-bill  negotiable  in  form. 

JOURNALIZING  DUE-BILLS 

The  following  memoranda  are  intended  to  give  drills  on  the 
principles  of  debit  and  credit  as  applied  to  due-bills. 

1.  Assuming  that  you  are  a  retail  grocer,  make  the  journal 
entry  for  the  due-bill  called  for  in  outline  1  above. 

Ans.    Expense  to  E.  M.  Delano. 

2.  Assuming  that  you  are  a  retail  grocer  and  have  just  issued 
William  McDonald  a  due-bill  for  $7.90,  payable  in  groceries,  in 
payment  for  repairs  on  delivery  wagon,  make  your  journal  entry. 

Ans.    Expense  to  William  McDonald. 


66  TEACHER'S   MANUAL 

3.  Assuming  that  you  are  a  commission  merchant  and  have 
bought  of  Charles  A.  Lyman  10  barrels  of  apples  at  $2  a  barrel, 
and  given  him  a  due -bill  for  the  amount  payable  in  money,  make 
your  journal  entry. 

Ans.   Merchandise  to  Bills  Payable. 

NOTE.  —  Some  business  houses  consider  a  due-bill  payable  in  money 
nothing  more  than  a  receipt  issued  to  acknowledge  an  indebtedness, 
and  do  not  make  any  entry  until  the  bill  is  paid.  If  a  due-bill  is 
drawn  payable  in  money  uto  order"  it  should  be  journalized  as  a 
bills  payable,  since  it  may  pass  hands  by  indorsement. 

4.  You  are  a  retail  grocer,  and  give  C.  H.  Dean  a  due-bill 
for  $19.40,  payable  in  groceries  from  your  store,  in  payment  for 
country  produce.     Make  your  entry. 

Ans.   Merchandise  to  C.  H.  Dean. 


EXERCISE  XLIII 

BUSINESS  FORMS  —  INDORSEMENTS 

SUGGESTIONS.  —  The  following  exercises  may  be  used  to  emphasize 
some  of  the  important  facts  relating  to  indorsements. 

1.  C.  E.  Mills  receives  of  the  White  Mfg.  Co.  a  check  on 
Traders  Bank  for  $165.     The  check  is  drawn  payable  to  E.  C. 
Mills.     Write  the  check  and  show  the  indorsement  of  C.  E.  Mills 
when  he  offers  the  paper  for  deposit. 

2.  Write   a   check   on   Merchants   Bank   in   favor  of   David 
Harmon.     Mr.  Harmon  is  unknown  at  your  bank.     Draw  up  the 
check  in  such  a  way  that  he  may  get  it  cashed  without  personal 
identification  at  your  bank. 

NOTE.  — What  is  desired  in  the  above  check  may  be  accomplished 
in  two  ways,  viz.  : 

1.  By  using  a  check  printed  payable  "to  bearer."  It  is  never 
advisable  to  let  a  check  pass  your  hands  with  interlineations,  erasures, 
or  alterations  of  any  kind.  Therefore  never  strike  out  the  words  4 '  or 
order  "  and  insert  the  words  "  or  bearer,"  but  draw  the  check  payable 


BUSINESS   FORMS  — INDORSEMENTS  67 

to  your  own  name  and  then  indorse  it  payable  to  bearer,  and  it  may 
be  cashed  without  identification. 

2.  By  drawing  the  check  payable  to  David  Harmon  and  then  sign- 
ing your  name  across  the  back.     This  makes  you  an  indorser  of  the 
check  and  serves  the  purpose  of  identification. 

3.  You  are  at  a  bank  and  have  with  you  a  check  made  pay- 
able to  your  order.     You  desire  to  get  it  cashed  and  take  the 
money  with  you.     Would  you  indorse  in  blank  or  in  full  ? 

Can  you  name  another  instance  where  a  blank  indorsement  is 
as  good  as  or  better  than  a  full  indorsement  ? 

4.  The  following  form  of  indorsement  is  frequently  found  on 
checks  sent  by  one  bank  to  another : 

Pay  National  City  Bank, 

Chicago,  or  order, 
National  Bank  of  Redemption, 

Boston. 

E.  M.  Ruggles,  Cashier. 
Indorsements  Guaranteed. 

Explain  the  meaning  of  the  term  "  indorsements  guaranteed." 

5.  Write  a  form  of  indorsement  which  is  best  for  all  paper 
deposited  with  a  bank. 

6.  Do  business  men  indicate  by  their  indorsements  whether 
paper  has  been  given  to  the  bank  for  collection  or  for  deposit  ?    Is 
it  necessary  that  they  should  ?     Give  reasons  for  your  answer. 

7.  You  receive  a  check  drawn  payable  to  Smith  &  Brown  for 
$75.     The  check  when  received  by  you  bears  only  the  blank 
indorsement  of  Smith  &  Brown.     Have  you  a  legal  right  to  write 
over  the  indorsees  signature  the  necessary  words  to  convert  the 
blank  indorsement  to  a  full  indorsement  ?     Explain. 

8.  You  have  two  notes  in  your  possession.     One  bears  no 
indorsement ;  the  other  bears  three  indorsements.     The  notes  are 
for  equal  amounts.     Which  is  the  stronger?     Why? 

9.  You  are  the  second  indorser  on  a  promissory  note.    Should 
you  indorse  above  or  below  the  first  indorser  ?     Why  ? 

NOTE.  —  Parties  who  sign  their  names  above  the  first  indorser  are 
sureties. 


68  TEACHER'S   MANUAL 

EXERCISE  XLIV 
BUSINESS  FORMS  — NOTES 

SUGGESTIONS.  —  The  following  exercise  may  be  used  to  emphasize 
some  of  the  important  facts  relating  to  notes. 

1.  A  note  is  dated  on  Sunday.     Is  it  binding?     Why? 

2.  A  note  payable  "  on  demand  "  is  not  dated.     Is  it  binding  ? 
Why? 

3.  A  demand  note  bears  a  date  two  years  since.     Would  you 
readily  accept  it  on  account  ?     Why  ? 

4.  What  is  a  chattel  note  ? 

NOTE.  — A  chattel  note  is  a  written  promise  to  pay  value  in  goods, 
wares,  etc.  Except  that  it  is  not  payable  in  money  and  is  not  nego- 
tiable, a  chattel  note  closely  resembles  an  ordinary  promissory  note. 

Form  of  Chattel  Note 


&&  to 


at  owis  /mA;tt&  ty  tA&  cl&ivv-eAAf  to- 
at,  ii 


5.    Write  your  chattel  note  for  $150  in  favor  of  D.  C.  Munroe, 
to  be  paid  for  in  good  timothy  hay  at  $12  per  ton. 


BUSINESS   FORMS  — NOTES  69 

6.  If  you  are  in  the  grain  and  feed  business  and  give  D.  C .  Mun- 
roe  the  above  note  to  apply  on  account,  what  is  your  journal  entry  ? 

Ans.   D.  C.  Munroe  to  Chattels  Payable. 

7.  At  maturity  you  pay  the  chattel  note  called  for  in  example  6 
above  by  the  delivery  of  12 £  tons  of  hay.     What  is  your  journal 
entry  ? 

Ans.    Chattels  Payable  to  Merchandise. 

8.  Write  a  demand  note  :  drawer,  your  name ;  payee,  Arthur 
Harrington. 

Give  your  entry  when  the  note  is  issued. 

Give  Arthur  Harrington's  entry  when  he  receives  the  note. 

9.  Can  a  negotiable  note  be  made  non-negotiable  ?    Explain. 
Can  a  non-negotiable  note  be  made  negotiable  ?     Explain. 

10.    Write  a  judgment  note. 

Form  of  Judgment  Note 


.  16,  f<?02 


{&&  to 
€.  W*.  Bt&M&&  ty*  ^on,  ov  oi^de^,,   ffh^o 

&eeA/v&ij  w~i£A  imtsAsZ&t  at  3^. 
b,  c/  do 


£AAs&i&>  am^d 
to-  Lriau^QAkiiyvv  am/d  a/jo/fataL,  and  to 
ati  taw&  s/^ 

and 


(owvzAsU 


11.    You  receive  a  judgment  note  against  Alfred  Simpkin  in 
settlement  of  his  indebtedness  to  you,  $125. 


70  TEACHER'S   MANUAL 

a*   Make  your  journal  entry. 

Ans.   Judgments  Receivable  to  Alfred  Simpkin. 

b.    Give  Alfred  Simpkin's  entry  when  he  issues  the  note. 

Ans.    Payee  to  Judgments  Payable. 


EXERCISE  XLV 
BUSINESS  FORMS  — DRAFTS 

SUGGESTIONS.  —  The  following  exercise  may  be  used  with  an 
advanced  class  to  illustrate  some  of  the  important  facts  relating  to 
drafts. 

1.  Is   there    any   difference   between    a    draft   payable   "  on 
demand  "  and  a  draft  payable  "  at  sight "  ? 

NOTE. — In  almost  all  of  the  states  drafts  payable  "at  sight"  and 
44  on  demand,"  as  regards  payment,  are  alike.  In  Massachusetts,  and 
a  few  other  states,  drafts  payable  "  on  demand  "  are  due  on  the  very 
day  they  are  presented  to  the  drawee,  while  drafts  payable  "  at  sight " 
are  entitled  to  three  days  of  grace. 

2.  Explain  the  meaning  of  "  acceptance  for  honor  "  as  applied 
to  drafts. 

NOTE.  — An  acceptance  for  honor  is  the  volunteer  acceptance  by  a 
person  not  a  party  to  the  draft.  Such  an  acceptance  is  made  after 
a  draft  has  been  protested  for  non-acceptance  to  promote  the  negotia- 
tion of  the  draft.  An  acceptor  for  honor  makes  himself  a  party  to  the 
draft  for  the  face  value  of  such  paper  plus  the  charges  for  protest. 
The  following  is  the  wording  of  an  acceptance  for  honor  : 

Accepted  for  the  honor  of 
Bates  Mfg.  Co., 
June  11,  1906, 

Payable  at 

Union  National  Bank 
Charles  H.  Palmer 

Such  an  acceptance  will  hold  the  acceptor  responsible  the  same  as 
the  first  indorser  of  a  note.     At  maturity  the  holder  should  present 


BUSINESS   FORMS  — DRAFTS  71 

the  draft  to  the  drawee  for  payment,  and  if  payment  is  refused, 
then  to  the  acceptor  for  honor.  Should  the  acceptor  for  honor 
pay  the  draft,  he  has  a  legal  claim  upon  all  prior  parties  to  the 
instrument. 

3.  June  15  you  drew  a  30-day  draft  on  King  &  Co.,  in  favor  of 
yourself,  for  invoice  of  merchandise  this  day,  $300,  and  left  the 
draft  at  the  bank  for  collection. 

Give  your  journal  entry,  assuming  that  the  sale  has  already 
been  entered  in  the  sales  book. 

4.  June  22  the  above  draft  was  protested  for  non-acceptance. 
Protest  fees,  $1.75.     Pay  the  protest  fees  in  cash. 

For  the  purpose  of  promoting  the  negotiation  of  the  draft, 
Ball  &  Hill  accepted  it  for  your  honor  and  accommodation. 
Give  your  entries. 

5.  At  the  maturity  of  the  draft  it  is  presented  to  King  &  Co., 
and  they  pay  it,  together  with  the  protest  fees,  by  check. 

Give  your  entry. 

6.  Assuming  that  King  &  Co.  refuse  to  honor  the  draft  at 
maturity,  and  Ball  &  Hill  are  called  upon  to  pay  it,  give  your 
journal  entry. 

7.  Are  time  drafts  negotiable   before  acceptance?    Explain 
fully. 

8.  Differentiate  the  following: 

a.  Check  and  sight  draft. 

b.  Check  and  bank  draft. 

c.  Promissory  note  and  due-bill  payable  in  money. 

d.  Chattel  note  and  due -bill  payable  in  merchandise. 


EXERCISE  XLVI 
ORDERS   PAYABLE  IN  GOODS 

SUGGESTIONS.  —  A  very  profitable  class  period  may  be  devoted  to  a 
discussion  of  orders  payable  in  goods.  While  these  orders  closely 
resemble  drafts,  there  are  many  points  of  difference  with  which  the 
accountant  ought  to  be  familiar. 


72  TEACHER'S   MANUAL 

The  following  matter  covers  the  salient  points  relating  to  orders 
payable  in  goods. 

Definition.  —  An  order  payable  in  goods  is  a  written  request  of 
one  party  on  a  second  party  to  deliver  goods  to  a  third  party,  or 
to  the  bearer. 

Compared  with  Drafts.  —  Orders  payable  in  goods  resemble 
drafts  in  the  following  particulars : 

1 .  There  are  three  parties  to  both  orders  payable  in  goods  and 
drafts,  viz.,  drawer,  drawee,  and  payee. 

2.  The  drawee  of  an  order  payable  in  goods,  like  the  drawee  of 
a  draft,  is  not  bound  to  honor  the  requests  made  upon  him. 

3.  An  order  payable  in  goods  may  be  accepted  in  a  manner 
similar  to  a  draft. 

Contrasted  with  Drafts.  —  The  points  of  contrast  in  orders  and 
drafts  may  be  stated  as  follows : 

1 .  An  order  payable  in  goods  requests  the  delivery  of  goods  ;  a 
draft  requests  the  payment  of  money. 

2.  A  draft  under  certain  conditions  may  be  a  bills  receivable 
or  a  bills  payable ;  an  order  payable  in  goods  can  never  be  a  bills 
receivable  or  bills  payable. 

3.  Drafts  are  generally  negotiable ;   orders  payable  in  goods 
are  not. 

Limited  Order  Payable  in  Goods 


'  {Boston,  ^4tass.,  c/W,   <? ,  19— 

A  Tn.  Sfwutifi,  ¥  &o.: 

^Deliver  to  TftoAJLim,   (d.  (k^food/ 

goods  to  the  value  of  cA\syi£%Af 
and  charge  the  same  to  the  account  of 


ORDERS   PAYABLE   IN   GOODS  73 

Open  Order  Payable  in  Goods 


^Boston,  ^Atass.t    cAw-.  /&,     /9 

ft.  A  lAtiHUmos  1?  &o-.  .- 

£)e liver  to  &.  &.  (^AsWve&t&Gul 

suc/i     groceries    'as     fie     may     require,     and 
charge   the   same   to   the   account  of 

ff&nton  ft 


EXAMPLES  FOR  PRACTICE 

1.  You  owe  E.  C.  Mason,  your  bookkeeper,  $18.50  for  wages,  and 
give  him  an  order  on  S.  S.  Pierce  &  Co.,  grocers,  for  the  amount, 
payable  in  groceries  from  their  store. 

a.  Write  the  order. 

b.  Make  your  journal  entry. 

NOTE.  —  Debit  Expense  and  credit  S.  S.  Pierce  &  Co.  Should 
S.  S.  Pierce  &  Co.  refuse  to  deliver  groceries  as  requested,  debit 
them  and  credit  Expense  when  the  order  is  returned  to  you  by 
E.  C.  Mason. 

2.  Issue  an  order  on  Cobb,  Bates  &  Co.  for  $17,  payable  in 
groceries,  to  be  given  to  W.  A.  Lyman,  your  shipping  clerk,  to 
apply  on  his  salary. 

a.  Write  the  order. 

b.  Make  your  journal  entry. 

c.  Make  Cobb,  Bates  &  Co.'s  journal  entry  when  they  deliver 
groceries  to  W.  A.  Lyman  amounting  to  $7.90,  to  apply  on  the 
above  order. 

d.  Who  will  hold  the  order  after  a  partial  delivery  of  goods 
has  been  made,  the  drawee  or  the  payee  ? 


74  TEACHER'S   MANUAL 

EXERCISE  XLVII 
CREDIT  MEMORANDUMS 

SUGGESTIONS.  —  Explain  to  the  class  the  usual  method  of  recording 
goods  returned  for  credit.  If  blank  forms  are  available,  have  the 
examples  for  practice  prepared.  Credit  memorandum  blanks  may  be 
obtained  from  any  large  stationer,  or  blank  forms  may  be  prepared 
by  the  students  from  an  outline  written  upon  the  blackboard. 

Recording  Returned  Goods.  —  When  goods  are  returned  by  the 
buyer  to  the  seller  with  a  request  that  such  goods  be  applied  on 
account,  memorandums  in  duplicate  similar  to  those  on  the  next 
page  are  generally  issued  by  the  seller. 

The  original  is  sent  to  the  customer  who  returned  the  goods, 
and  when  received  by  him  is  usually  entered  in  his  sales  book  the 
same  as  any  regular  sale. 

The  duplicate  is  made  at  the  same  time  as  the  original  by 
means  of  carbon  paper.  It  is  usually  pasted  in  the  invoice 
book,  or  entered  in  the  purchase  book  of  the  concern  allowing 
the  credit. 

NOTE.  — The  records  for  goods  returned  are  sometimes  made  in  the 
journal. 

EXAMPLES  FOR  PRACTICE 

Write  credit  memorandums  for  the  following : 

1.  7  bu.  clover  seed,  at  $4.50,  returned  by  C.  W.  Jefferson  to 
Macey  &  Cooper  on  account  of  inferior  quality. 

2.  4  bbls.  XX  soda  crackers,  at  $5.60,  returned  by  Snow  &  Co. 
to  Kennedy  &  Son.     The  crackers  were  unsalable  when  received 
by  Snow  &  Co.,  having  the  appearance  of  having  been  damaged 
by  water. 

3.  9  bbls.  XXX  starch  and  3  bbls.  Standard  A  sugar  returned 
by  Mason  &  Harper  to  Bengal  &  Son. 

4.  Explain    just  what  records  would  be  made  for  the  above 
transactions  :  (a)  on  the  books  of  the  parties  returning  the  goods  •, 
(&)  on  the  books  of  the  parties  allowing  the  credit. 


CREDIT  MEMORANDUMS 


75 


ORIGINAL 

>~  '  JtX  Jll/  JD  I  I                                                                          Goods  returned  to  us 

she 

ula  De  accom 

paniea 

by  a  complete  invoice, 
.Voo/y/^x/  A/t                                          and  all  other  claims 

tsssuea  oy                             ghould  algo  be  bmed) 

^--^            i*       £*                                 o        O                     stating  the  date 

£D.  ^rt.  Sampson   Cr    Son         charge. 

of  our 

{Boston,  ^Lass.f    fan.  21,     19  

Tn.  Tn.  tfatiofruAAf  ¥  &o.,  t/fiviru?l 

1,ieLL,  ft 

%M4/. 

WE  HAVE  THIS  DAY  GIVEN  YOU  CREDIT  ON  ACCOUNT  FOR 

THE  FOLLOWING: 

,0   ^.  £*&*'  KLcL  gtove*,     7.  * 

75 

CREDIT 


DUPLICATE 


Issued  by 
•.  Sampson    &•   Oo/z 

^Boston,  ^jtass., 


WE  HAVE  THIS  DAY  GIVEN   YOU  CREDIT  ON  ACCOUNT  FOR   THE  FOLLOWING: 


10 


fdci 


7  .5 


75 


76  TEACHER'S  MANUAL 

EXERCISE  XLVIII 
KEEPING  A  BANK  ACCOUNT 

SUGGESTIONS. — The  following  outline  of  the  result  of  a  series  of 
exercises  on  "  Keeping  a  Bank  Account "  may  suggest  to  the  teacher 
a  method  of  bringing  out  and  emphasizing  some  of  the  salient  points  in 
this  connection.  Develop  such  outlines  by  skillful  questioning ;  have 
them  written  on  the  blackboard  and  copied  by  each  student. 

I.   How  TO  OPEN  A  BANK  ACCOUNT 

1.  Select  a  bank  of  sound  financial  standing. 

2.  If  a  stranger,  provide  yourself  with  a  proper  introduction. 

3.  Apply  to  the  cashier  when  making  application  to  open  an 
account. 

4.  If  doing  business  for  another,  bring  with  you  your  power 
of  attorney,  etc. 

5.  Sign  your  name  in  the  signature  book  just  as  you  propose 
to  sign  it  on  checks,  notes,  etc. 

6.  Have  the  proper  bank  officer  receipt  in  the  pass  book  all 
sums  deposited. 

II.     HOW   TO   PREPARE    ITEMS    FOR   DEPOSIT 

1.  Count  all  money  carefully. 

2.  Place  the  bills  of  one  denomination  together. 

3.  Place  the  classified  bills  all  one  way  and  right  side  up. 

4.  Separate  the  gold  and  silver,  and  sort  the  silver  by  denomi- 
nations. 

5.  Be  careful  to  arrange  the  items  correctly  on  the  deposit  slip. 

6.  Indorse  the  checks,  etc.,  properly. 

a.  Write  across  the  back,  —  never  lengthwise. 

b.  If  yours  is  the  first  indorsement,  write  it  about  an  inch  from 
the  top. 

c.  If  there  are  other  indorsements,  write  immediately  under 
the  last  one. 

d.  Indorse  right  side  up. 


KEEPING  A  BANK  ACCOUNT          77 

7.    Always  take  the  pass  book  to  the  bank  when  making 
a  deposit. 

III.   THINGS  TO  OBSERVE  IN  KEEPING  A  CHECK  BOOK 

1.  Number  all  checks  and  check  stubs. 

2.  Give  a  detailed  list  of  all  items  of  deposit. 

3.  Show  at  all  times  the  amount  on  deposit. 

4.  O.K.  all  records  that  agree  with  the  vouchers  returned  by 
the  bank. 

5.  If  the  check  book  does  not  agree  with  the  pass  book,  find 
out  why. 

6.  Payment  of  an  uncertified  check  may  be  stopped  by  request- 
ing the  bank  not  to  pay  it. 

7.  Payment  of  a  certified  check  cannot  be  stopped. 

8.  When  a  check  is  certified  make  a  note  of  it  in  red  ink  on 
the  check  stub. 

9.  When  a  duplicate  check  is  given  for  any  reason,  the  word 
"  duplicate  "  should  be  plainly  written  or  stamped  on  the  check 
and  check  stub. 

10.  When  sending  a  check  to  a  person  who  is  not  likely  to 
be  well  known  in  banking  circles,  give  the  residence  of  the  payee 
in  the  body  of  the  check. 

IV.   THINGS  TO  AVOID  IN  DOING  BUSINESS  WITH  A  BANK 

1.  Exchanging  checks. 

2.  Giving  checks  to  utter  strangers. 

3.  Overdrawing  your  account  without  permission. 

4.  Giving  a  check  to  a  person  on  condition  that  it  is  not  to  be 
used  until  a  certain  time. 

5.  Dating  checks  ahead,  or  not  dating  them  at  all. 

6.  Making  deposits  without  your  bank  book. 

7.  Writing  checks  not  taken  from  your  own  check  book. 


78 


TEACHER'S   MANUAL 


EXERCISE  XLIX 
SPECIAL  LEDGER    TRANSFERS   AND   RULINGS 

Forwarding  Accounts.  — When  the  space  allotted  to  any  ledger 
account  has  been  filled,  the  account  should  be  forwarded  to 
another  page;  In  most  cases  it  is  desirable  to  carry  forward  the 
footings  of  accounts  instead  of  the  balances.  In  transferring 
such  accounts  as.  Merchandise  never  carry  forward  the  balance,  but 
the  debit  and  credit  footings.  The  Merchandise  account  should 
exhibit  the  purchases  and  sales  of  the  business,  and  if  only  the 
balance  were  forwarded  in  a  transfer  the  account  would  not 
furnish  the  proper  information.  In  all  property  accounts  it  is 
generally  desirable  that  each  account  shall  show  the  aggregate 
debits  and  credits  for  any  given  period. 

The  following  illustrations  show  an  account  closed  and  for- 
warded. 

Merchandise 


Jan. 

31 

LB. 

6 

750 

Jan. 

31 

S.B. 

16 

6400 

31 

C.B. 

7 

920 

Feb. 

27 

S.B. 

31 

5960 

Feb. 

1 

C.B. 

9 

726 

Mar. 

31 

S.B. 

45 

8240 

27 

LB. 

11 

9250 

Apr. 

30 

S.B. 

61 

5420 

60 

Mar. 

1 

C.B. 

17 

177 

20 

31 

LB. 

17 

7217 

Apr. 

2 

C.B. 

29 

126 

50 

30 

LB. 

21 

8741 

May 

6 

C.B. 

37 

132 

50 

6 

Forw'd  to 

24 

28040 

20 

May 

6 

Forw'd  to 

24 

26020 

60 

Merchandise 


May 

6 

For  w'd  from 

i 

28040 

20 

May 

G 

Forw'd  from 

\ 

26020 

60 

SPECIAL  LEDGEK   TRANSFERS  AND   RULINGS       79 

As  soon  as  the  individual  amounts  of  any  personal  account 
balance  they  should  be  ruled  out,  as  shown  by  the  following 
illustration. 

Charles  M.  Williams 


Jan. 

2 

S.B. 
S.B. 

18 

79 

40 

Jan. 

12 

C.B. 

12      79 

40 

Feb. 

30 

28 

126 

From  the  above  illustration  it  will  be  noted  that  it  might  not, 
in  many  cases,  be  practicable  to  forward  the  entire  footings  of 
personal  accounts  when  it  becomes  necessary  to  carry  such  accounts 
to  a  new  page.  Unless  there  is  some  good  reason  for  showing 
the  aggregate  debits  and  credits  of  personal  accounts,  only  the 
balance  of  such  accounts  need  be  forwarded  in  making  trans- 
fers. Sometimes  merchants  have  agreements  with  each  other  to 
the  effect  that  after  the  sales  or  purchases  have  reached  a  stated 
amount,  usually  quite  a  large  sum,  a  certain  per  cent  rebate  will 
be  allowed.  In  such,  and  all  similar  cases,  the  personal  accounts 
should  be  at  all  times  in  such  condition  that  the  aggregate 
debits  and  credits  may  be  readily  determined,  and  the  entire 
footings  should  be  forwarded  in  making  transfers  to  a  new 
account. 

Generally,  however,  personal  accounts  may  be  forwarded  as 
shown  in  the  following  illustrations. 


Mason  &  Hamlin 


Jan. 

16 

S.B. 

9 

240 

Feb. 

1 

C.B. 

12 

300 

30 

S.B. 

14 

60 

8 

Balance  to 

21 

73 

60 

Feb. 

8 

S.B. 

19 

73 

60 

373 

60 

373 

60 

80 


TEACHER'S   MANUAL 
Mason  &  Hamlin 


Feb. 

8 

Balance  from 

11 

73 

60 

Accounts  with  Successors.  —  When  a  merchant  learns  that  one 
of  his  customers  has  been  succeeded  by  a  new  firm,  the  new  firm 
taking  the  resources  and  assuming  the  liabilities  of  the  old  firm, 
he  should  make  the  proper  transfer  on  his  ledger.  In  most  cases 
it  is  considered  desirable  to  close  the  old  account  and  open  an 
account  with  the  successors.  The  following  illustrations  show 
the  proper  rulings  and  records  for  such  a  transfer. 

Jones  &  Co.  (Succeeded  by  Smith  &  Co.) 


Jan. 

16 

S.B. 
S.B. 
S.B. 
S.B. 

14 

140 

Jan. 

29 

C.B. 
C.B. 
J. 

Smith  &  Co. 

8 

140 

27 

28 

160 

Feb. 

25 

16 

160 

Feb. 

9 

36 

380 

40 

Mar. 

1 

9 

380 

40 

Mar. 

6 

8 

59 

120 
60 

60 

Mar. 

18 

29 

180 

60 

180 

60 

180 

60 

Smith  &  Co.  (Successors  to  Jones  &  Co.) 


Mar. 

18 

Jones  &  Co. 

16 

180 

60 

Work  for  Practice.  —  Dictate  the  following  accounts,  to  be 
opened  on  a  half  sheet  of  ledger  paper,  three  accounts  to  the 
page.  Supply  explanations  and  folios. 


Jones  &  Co. 


Dr. 


Julyl 


July  20 
Aug.  2 


Cr. 

$200. 
90. 


SPECIAL   LEDGEK   TRANSFERS  AND   RULINGS       81 

A  circular  has  been  received,  announcing  that  the  above  firm 

has  been  succeeded  by  Osgood  &  Co.,  the  new  firm  taking  the 
resources  and  assuming  the  liabilities  of  the  old  firm. 

Open  the  old  account,  and  make  the  proper  entry  to  close  it 
into  the  new  account.     Open  the  new  account. 

2 

Merchandise 

Dr.  Cr. 

Jan.   31                $1200.40                 Jan.  31  $900. 

Feb.  28                  1100.                    Feb.  28  800. 

Mar.  31                  1640.                     Mar.  31  1100.60 

Apr.  30                  1500.                     Apr.  30  1200.40 

May  31                  1900.                     May  31  1400.90 

June  30                  1100.                     June  30  1250. 

July  31                   1050.                     July  31  800.40 

Open  the  above  account,  and  transfer  the  totals  to  a  new  space 
in  the  ledger. 

3 

Smith,  Taylor  &  Co. 
Dr.  Cr. 

July  15  $900.  June  16  $1200. 

19  400. 

30  750. 

Open  the  above  account,  and  carry  forward  the  balance  to  a 
new  space  in  the  ledger. 

EXERCISE  L 

RESOURCES  AND  LIABILITIES   CLASSIFIED  AND 
EXPLAINED 

Resources 

Classes.  —  The  resources  of  a  business  may  be  divided  into 
three  distinct  classes  as  follows : 

1.  Fixed. 

2.  Floating. 

3.  Speculative. 


82  TEACHER'S   MANUAL 

Fixed  Resources.  —  Fixed  resources  are  the  assets  of  the  business 
which  are  of  a  permanent  and  essential  nature ;  as,  roadbed  of  a 
railroad,  land  and  plant  of  a  mining  concern,  franchise  of  a  street 
railway,  machinery  and  tools  of  a  manufacturing  concern,  etc. 

Floating  Resources.  —  Floating  resources  are  assets  of  the  busi- 
ness which  have  no  fixed  or  permanent  value,  but  which  change 
from  day  to  day  on  account  of  sale,  exchange,  etc.;  as,  bills 
receivable,  accounts  receivable,  goods  in  stock,  cash,  etc. 

Speculative  Resources.  —  Speculative  resources  are  assets  of  the 
business  which  are  subject  to  fluctuation  in  value  from  time  to 
time  ;  as,  stocks,  bonds,  etc. 

Liabilities 

Classes.  —  The  liabilities  of  a  business  may  be  divided  into  two 
distinct  classes  as  follows  : 

1.  Fixed. 

2.  Floating. 

Fixed  Liabilities.  —  Fixed  liabilities  are  debts  of  the  business 
which  are  of  a  permanent  character ;  as,  capital,  mortgages,  etc. 

Floating  Liabilities.  —  Floating  liabilities  are  the  ordinary  trade 
debts  of  a  business ;  as,  bills  payable,  accounts  payable,  etc. 

WORK  FOR  PRACTICE 

SUGGESTIONS.  —  Discuss  with  the  students  the  classes  of  resources 
and  liabilities.  Write  the  following  names  of  accounts  on  the  black- 
board and  ask  for : 

1.  A  separation  of  the  accounts  into  resources  and  liabilities. 

2.  A  classification  of  the  resources  under  (a)  fixed  resources; 
(6)  floating  resources ;  (c)  speculative  resources. 

3.  A  classification  of   the  liabilities  under   (a)  fixed  liabilities; 
(6)  floating  liabilities. 

NAMES  OF  ACCOUNTS 

1.  Cash. 

2.  Bills  Receivable. 

3.  Bills  Payable. 

4.  Stocks  and  Bonds. 


STATEMENTS,   TRIAL  BALANCES,    ETC.  83 

5.  Kent  (owed  by  the  business,  per  inventory). 

6.  Salaries  (unpaid,  per  inventory). 

7.  Expense  (coal  on  hand  for  office  use,  per  inventory). 

8.  Taxes  (unpaid,  per  inventory). 

9.  Accounts  Payable. 

10.  Accounts  Receivable. 

11.  Good  Will  (debit  balance). 

12.  Capital  Stock. 

13.  Treasury  Stock. 

14.  Machinery  and  Tools. 

15.  Mortgages  Receivable. 

16.  Mortgages  Payable. 

17.  Franchise. 

18.  Surplus  Fund. 

19.  Real  Estate  (debit  balance). 

20.  Interest  (accrued  on  bills  payable,  per  inventory). 

EXERCISE  LI 
STATEMENTS,  TRIAL  BALANCES,  ETC. 

1.   June  16  Charles  Williams  and  Frank  Poole  commenced  a 
provision  business  with  resources  and  liabilities  as  follows  : 

Resources 

Cash  $1200. 

Merchandise  3500. 

Fixtures  350. 

Accounts  Receivable  700. 

Liabilities 

Notes  outstanding  $500. 

Accounts  Payable  600. 

The  partners  have  equal  interests  in  the  business. 
September  30  of  the  same  year  the  resources  and  liabilities  of 
the  business  were  as  follows : 


84  TEACHER'S   MANUAL 

Resources 
Cash  on  hand 

Merchandise  in  stock  4270. 

Fixtures  in  stock  720. 

Accounts  Receivable,  per  ledger  1120. 

Notes  due  the  firm  450. 

Liabilities 

Notes  outstanding  $562.50 

Accounts  Payable,  per  ledger  495.60 

Their  books  have  been  kept  by  single  entry. 

a.  Prepare  a  statement  showing  the  net  gain  for  the  period 
June  16  to  September  30  ;  also  the  present  worth  of  each  partner. 

b.  Make  the  entry  necessary  to  change  the  books  to  double  entry. 
2.    The  following  is  a  trial  balance  of  an  insolvent  business  in 

which  the  proprietors  have  equal  investments. 

Cash  $884.23 

Merchandise  8400.  $5200. 

Accounts  Receivable  3400. 

Bills  Receivable  1065.80 

Furniture  and  Fixtures  950. 

Expense  1962.87 

Interest  and  Discount  126.90 

Accounts  Payable  7500. 

Bills  Payable  1739.80 

John  W.  Radcliffe,  Proprietor  1150. 

Eton  M.  Closs,  Proprietor  1200. 

A  summary  of  the  resource   and   liability  inventories  of  the 
business  is  as  follows : 

Value  of  fixtures  on  hand  $900. 

Value  of  expense  items  on  hand  152.90 

Unpaid  telephone  bill  16.90 

Value  of  merchandise  in  stock  1600. 

Unpaid  freight  bill  79.20 

Interest  accrued  on  bills  payable  4.40 

Interest  accrued  on  bills  receivable  9.20 


RECORDS   OF  AN  ADMINISTRATOR  85 

a.  Make  a  statement  of  losses  and  gains. 

b.  Make  a  statement  of  resources  and  liabilities. 

c.  Prove  the  statements. 

d.  Open  the  accounts  on  a  sheet  of  ledger  paper,  four  to  the 
page.     Close  the  loss  and  gain  accounts  and  show  the  net  insolv- 
ency of  each  partner. 

e.  Determine  at  what  per  cent  on  a  dollar  Radcliffe  &  Closs 
can  pay  their  liabilities. 

EXERCISE  LII 

RECORDS   OF   AN  ADMINISTRATOR 

SUGGESTIONS.  —  The  following  memoranda  may  be  used  to  show 
the  accounts  of  an  administrator  appointed  to  close  up  the  estate  of  a 
person  deceased.  The  student  may  be  represented  as  administrator. 
Use  journal,  cash  book,  and  ledger.  Post  all  the  transactions  and 
show  the  closing  of  the  accounts  on  the  ledger. 

May  1 

You  have  this  day  been  appointed  administrator  of  the  will  of 
the  late  Charles  N.  Sanborn.  The  will  provides  that  the  widow 
of  the  deceased,  Mrs.  Mary  Sanborn,  shall  have  one-third  of 
everything  belonging  to  the  estate,  and  that  the  three  children, 
Charles  L.,  Eliza  E.,  and  Margaret  W.,  shall  each  receive  one- 
third  of  the  remainder  of  such  property. 

May  2 

You  have  completed  a  statement  of  the  resources  and  liabilities 
of  the  estate  of  the  deceased  as  follows : 

Resources 

City  homestead,  consisting  of  house  and  barns  $30000. 
Summer  residence  at  Summerland  Island,  Alexandria 

Bay,  KY.  3750. 

Household  furniture  6500. 

Judgment  against  F.  E.  Gorham  750. 

Interest  accrued  on  above  45. 


86  TEACHER'S  MANUAL 

One  carriage  horse  $125. 
One  carriage  250. 

Two  sets  harness,  worth  $85  each  170. 

Kodak  bonds  9000. 
Interest  accrued  on  above  450. 

Note  of  C.  B.  Ellis  800. 

Interest  accrued  on  above  72. 

C.  D.  Miller  owes  on  account  160. 

W.  E.  Avery  owes  on  account  240. 

Cash  in  Union  Bank  7250. 
Cash  in  safe  217.50 

Liabilities 

Raymond  Dann,  store  account  $60.50 

James  Harmon,  blacksmithing  10.60 

NOTE. — Debit  the  different  resources  above  and  credit  Sanborn 
Estate  for  the  total.  Debit  Sanborn  Estate  for  the  total  liabilities,  and 
credit  each  liability.  The  other  entries  following  do  not  differ  mate- 
rially from  those  of  any  mercantile  business.  The  city  homestead 
and  summer  resort  may  be  entered  under  Real  Estate,  and  the 
carriage  horse,  carriage,  and  harnesses  may  be  entered  under  Horse 
and  Carriage  account. 

May  3 

Dispose  of  property  as  follows : 

Carriage  horse,  carriage,  and  the  two  harnesses  to  Charles  D. 
Elwell  for  $450,  on  his  note  at  3  months,  indorsed  by  Traver 
&Co. 

City  homestead  has  been  bought  by  Mrs.  Mary  Sanborn  for 
$30,000,  and  charged  to  her  account;  also  household  furniture, 


The  summer  residence  has  been  deeded  to  Margaret  W.  Sanborn, 
and  charged  to  her  account,  $3750. 

Pay  by  check  the  balances  due  Raymond  Dann  and  James 
Harmon  on  account. 

Receive  of  C.  D.  Miller  cash,  $160,  in  full  of  account. 


RECORDS   OE  AN  ADMINISTRATOR  87 

May  9 

Receive  of  C.  B.  Ellis  cash  for  his  note  and  interest  to  date. 
Face  of  note,  $800;  interest,  $72.40. 

Sell  Kodak  bonds  to  Ely  &  Co.  at  par,  with  accrued  interest 
added.  Par  value  of  bonds,  $9000  ;  accrued  interest,  $454.50. 

Eliza  E.  Sanborn  takes  the  judgment  against  F.  E.  Gorham, 
with  interest,  to  apply  on  her  share  in  the  estate.  Face  of 
judgment,  $750  ;  interest  accrued,  $45.38. 

Pay  Charles  L.  Sanborn  $200  by  check,  to  apply  on  his  share 
in  the  estate. 

May  16 

Appropriate  by  check  on  Union  Bank  your  fee  as  administrator 
of  the  estate,  $375. 

Receive  of  W.  E.  Avery  his  check  in  full  of  account. 

May  27 

Charles  L.  Sanborn  takes  the  note  received  for  the  sale  of  the 
horse,  carriage,  and  harnesses  at  its  face  value,  and  the  same  is 
charged  to  his  account. 

Post  and  make  a  trial  balance.  Close  the  accounts  showing 
loss  or  gain  into  Loss  and  Gain  account.  Close  the  net  loss  or 
gain  into  Sanborn  Estate.  Close  all  other  accounts  in  the  ledger 
that  balance. 

May  31 

Make  an  entry  to  divide  properly  the  net  estate  between  the 
heirs. 

NOTE.  —  Debit  Sanborn  Estate,  and  credit  each  heir  for  his  or  her 
interest. 

Receive  from  Mrs.  Mary  Sanborn  cash  for  the  balance  due  by 
her  to  the  estate. 

Deposit  in  Union  Bank  the  check  and  all  cash  on  hand. 

Give  Charles  L.  Sanborn,  Eliza  E.  Sanborn,  and  Margaret  W. 
Sanborn  checks  for  their  respective  interests  in  the  estate. 

Post  the  above  entries  to  the  ledger.  All  accounts  should  now 
balance.  Rule  and  foot  them.  Rule  and  foot  the  cash  book. 


88  TEACHER'S   MANUAL 

EXERCISE  LIII 
A  KEVIEW  OF  DRAFTS 

SUGGESTIONS.  —  The  following  exercise  may  be  used  as  a  review  of 
drafts.  The  work  may  be  journalized  on  regular  journal  paper,  posted 
to  a  ledger,  and  a  trial  balance  made. 

April  15.  C.  W.  Benton  began  business  with  resources  and 
liabilities  as  follows : 

Resources 

Stocks  and  bonds  on  hand  $3200. 

Interest  accrued  on  above  96. 

Merchandise,  per  inventory  7200. 

Cash  on  hand  1700. 

Store  and  lot  3800. 

Coal  on  hand  85. 

Bills  receivable,  per  bill  book  400. 

Interest  accrued  on  above  12. 

Account  against  C.  E.  Williams  500. 

Account  against  W.  O.  Avery  1700. 

Account  against  C.  D.  Snow  900. 

Mortgage  on  property,  24  Main  Street  1200. 

Liabilities 

Due  R.  O.  Odell  $1500. 

Due  Keeler  &  Co.  1200. 

Due  Mason  &  Frey  1400. 

Due  Doe  &  Co.  1200. 

Unpaid  freight  bill  1 90. 

Unpaid  taxes  300. 

Unpaid  telephone  bill  12. 

16.  He  drew  a  sight  draft  on  C.  E.  Williams,  in  favor  of 
K.  O.  Odell,  for  $130. 

17.  He  accepted  Keeler  &  Co.'s  30-day  draft  on  him,  in  favor 
of  themselves,  for 


EXAMPLES  FOR  JOURNALIZING  89 

18.  He  prepaid  by  check  Mason  &  Frey's  30-day  draft  on  him, 
in  favor  of  themselves,  for  $200. 

19.  He  drew  a  sight  draft  on  C.  D.  Snow  for  $300,  in  favor  of 
Keeler  &  Co.,  and  remitted  it  to  the  latter  to  apply  on  account. 

20.  He  paid  freight  bill  to  date  by  a  sight  draft  on  W.  O. 
Avery,  in  favor  of  City  Carting  Co.,  $190. 

22.  He  paid  taxes  due  on  store  and  lot  by  a  sight  draft  on 

C.  E.  Williams,  in  favor  of  M.  L.  Coleman,  City  Treasurer,  $300. 

23.  He  paid  a  sight  draft  in  favor  of  Doe  &  Co.  for  $1200,  by 
assigning  his  mortgage  on  property,  24  Main  Street. 

24.  He  received  of  W.  O.  Avery  a  30-day  draft  on  Keeler  & 
Co.,  $200,  to  apply  on  account. 

25.  He  received  of  C.  D.  Snow  a  30-day  draft  on  C.  F.  Joiner, 
in  his  own  favor,  accepted,  $100. 

26.  He  remitted  C.  L.  King's  note  to  R.  O.  Odell  to  apply  on 
account.     Face  of  note,  $200;  interest  accrued,  $6.36. 

27.  He  sold  M.  O.  Long  merchandise  amounting  to  $560,  drew 
a  30-day  draft  for  the  amount  of  the  bill,  and  left  it  at  Union 
Bank  for  collection. 

EXERCISE  LIV 

EXAMPLES   FOR   JOURNALIZING 

1.  You  have  received  from  the  executors  of  the  estate  of  a 
deceased  relative,  as  a  bequest,  a  house  and  lot  at  792  Causeway 
Street,  valued  at  $4500,  and  have  invested  the  same  in  a  business 
of  which  you  are  sole  proprietor.     Make  your  entry. 

2.  D.  O.  Beach  &  Co.  owed  you  $692.50.     One  week  ago  they 
disposed  of  their  business  to  Charles  M.  Congdon.     Mr.  Congdon 
is  to  have  all  the  resources  and  assume  all  the  liabilities  of  the 
retiring  firm  and  he  remits  you  his  note  at  10  days,  to  apply  on 
account.     The  full  balance  of  $692.50  now  stands  charged  to 

D.  O.  Beach  &  Co.     Make  your  entry. 

3.  J.  E.  King  retires  from  the  firm  of  Coffin,  King  &  Co.,  receiv- 
ing City  Water  Works  Bonds,  $7500,  and  a  note  for  $7500,  pay- 
able in  six  months,  with  interest  at  6%.     On  balancing  the  books 


90  TEACHER'S   MANUAL 

his  net  capital  is  found  to  be  $15,461.90.  The  note  and  bonds 
are  accepted  by  King  as  full  payment  for  his  entire  interest  in 
the  firm  of  Coffin,  King  &  Co.  Make  the  entry  for  Coffin,  King  & 
Co.'s  books. 

4.  Geo.  W.  Dunkle  and  E.  M.  Demerest  are  equal  partners  in 
a  furniture  business  under  the  firm  name  of  Demerest  &  Co. 
Dunkle  offers  to  sell  his  entire  interest  in  the  business  to  Demerest 
for  $25,000,  which  offer  Demerest  accepts  and  gives  Dunkle  a  check 
on  Union  Bank  for  the  amount.     The  balance  to  the  credit  of 
Geo.  W.  Dunkle's   account   in  the   firm's  books  is  $19,982.60. 
E.  M.  Demerest  continues  the  business  under  the  old  firm  name. 
What  entry  should  be  made  by  Demerest  in  the  firm's  books  for 
his  purchase  of  Dunkle's  interest? 

5.  F.   O.  Wolven   owes   you   $1515.     He   gives   you   in   full 
settlement  of  account  A.  J.  Morley  &  Co.'s  note,  $1500,  due  in 
30  days,  with  60  days  accrued  interest.     Make  your  entry. 

6.  C.  A.  Wesp  and  W.  D.  Lyman  are  partners  in  a  furni- 
ture business  under  the  firm  name  of  The  Wesp  Furniture  Co. 
A.  B.  Curtis  buys  for  cash  W.  D.  Lyman's  entire  interest  for 
$15,000,  and  is  admitted  as  an  equal  partner  with  C.  A.  Wesp, 
Curtis's   net   capital   to   be   the   present  worth   of  the   retiring 
partner,  $13,790.69.     Make  the  firm's  entry  for  the  change  in  the 
partnership. 

7.  John  E.  Williams  owes  Sidney  &  Clark  $1000.     Sidney  & 
Clark  offer  to  discount  the  claim  2%  for  cash.     The  offer  is 
accepted ;  but  Williams  not  having  the  ready  money  is  obliged  to 
get  accommodation  at  his  bank  by  discounting  his  90-day  note 
at  6%,  the  note  producing  just  the  amount  necessary  to  effect  a 
settlement  with  Sidney  &  Clark.     A  New  York  draft  is  issued  to 
Williams  for  the  proceeds,  which  draft  he  immediately  remits  to 
Sidney  &  Clark.     Make  Williams's  entry. 

8.  You  bought  at  auction  $2000  worth  of  merchandise  on  your 
note  at  10  days,  with  interest  at  6%.     Before  entering  the  purchase 
on  your  books  you  sold  the  goods  for  $2500,  receiving  a  note  pay- 
able in  30  days,  with  interest  at  6%.     Make  your  journal  entry. 

9.  Charles  M.  Langdon  owes  you  $720.     In  payment  he  hands 
you  an  acceptance  drawn  by  R.  H.  White  &  Co.,  in  their  own 


EXAMPLES   FOR  JOURNALIZING  91 

favor,  and  indorsed  by  them  to  Charles  M.  Langdon,  $1142.50. 
The  acceptance  being  due  to-day,  you  give  Langdon  a  check  for 
the  difference  between  his  indebtedness  to  you  and  your  acceptance. 

a.  Make  your  entry. 

b.  Make  Charles  M.  Langdon's  entry. 

10.  Frank  H.  Congdon  pays  one  month's  rent  of  his  store,  $250, 
by  a  sight  draft  on  debtor  customers,  Ellery  &  Davis.  Make 
Congdon's  entry. 

EXERCISE  LV 
EXAMPLES  FOR  JOURNALIZING 

SUGGESTIONS.  — The  following  transactions  may  be  used  as  an  oral 
or  a  written  exercise  in  journalizing.  If  used  as  a  written  exercise, 
full  journal  explanations  should  be  required. 

You  are  a  retail  merchant  and  during  the  month  of  July  have 
transactions  for  your  journal  as  follows : 

1.  E.  D.  Snow  owes  you  $73.  You  accept  his  30-day  note 
for  $50,  indorsed  by  Williams  &  Rogers,  in  full  of  account. 

7.  Receive  of  Bender  Bros.  4  tons  of  coal,  at  $5.50,  in  payment 
for  interest  accrued  on  their  note  which  you  hold.  The  coal  is 
for  use  in  your  office. 

9.  Pay  your  acceptance  in  favor  of  Jordan,  Marsh  &  Co., 
$126,  due  to-day,  by  a  sight  draft  on  Hill  &  Co.,  who  owe  you  on 
account. 

12.  You  owe  Henry  Wheeler  &  Co.  $723,  and  make  full  payment 
as  follows  : 


J.  O.  Bell's  note  in  you-r  favor 

Interest  accrued  on  above  3.92 

Your  30-day  note,  with  interest  at  6%  494.08 

15.  Pay  tailor  bill,  $42.90,  by  a  sight  draft  on  Ely  &  Co.,  who 
owe  you  on  account. 

16.  Palmer  &  Co.'s  note  for  $350,  with  90  days  accrued  interest, 
is  due  to-day.     Not  being  able  to  pay  it,  he  gives  you  his  renewal 
note  at  30  days,  with  interest,  for  the  old  note  and  the  interest  due. 


92  TEACHER'S   MANUAL 

18.    Sell  Henry  Clark  1  office  safe,  $250,  on  his  note  at  60  days. 
The  safe  was  originally  bought  for  use  in  your  office. 

26.  Pay  F.  M.  Taylor  &  Co.'s  coal  bill  rendered  to  C.  O.  Miller, 
your  bookkeeper,  $17.50.    The  amount  is  to  apply  on  Mr.  Miller's 
salary. 

27.  Pay  taxes  on  the  store  and  lot  owned  by  you,  $125,  by  a 
sight  draft  on  C.  M.  Snow,  a  debtor  customer. 

28.  Give  J.  M.  Cox,  a  salesman,  an  order  payable  in  goods  from 
your  store  for  one-half  his  weekly  wages,  $9.50. 

29.  Pay  your  note  in  favor  of  Briggs  &  Co.,  $700,  and  interest 
accrued,  $19.70,  by  a  sight  draft  on  Frank  Mason  &  Son,  who  owe 
you  on  account. 

EXERCISE  LVI 
THE   TRIAL  BALANCE 

The  following  outline  is  suggestive  of  results  that  may  be 
obtained  from  a  class  discussion  of  the  trial  balance. 
I.   Purpose. 

1.  To  test  the  correctness  of  posting :  (a)  the  amounts  posted; 
(&)  the  side  to  which  amounts  are  posted. 

2.  To  furnish  a  basis  from  which  to  formulate  business  and 
financial  statements. 

3.  To  show  the  equality  of   the   ledger,   and   to   serve  as  a 
preliminary  step  in  the  process  of  closing  the  same. 

4.  To  furnish  information  for :   (a)  a  comparison  of  the  present 
results  of  the  business  with  the  results  for  former  periods ;  (5)  a 
thorough  analysis  of  the  general  progress  and  condition  of  the 
business. 

II.   What  a  trial  balance  does  not  prove  conclusively : 

1.  That  individual  items  have  been  posted  to  the  right  accounts. 

2.  That  the  records  upon  the  books  of  original  entry  have  been 
made  correctly. 

3.  That  all  the  computations  are  correct. 

4.  That  the  additions  in  the  ledger,  or  even  in  the  posting 
mediums,  are  correct. 


THE   TEIAL  BALANCE  93 

III.  The    accounts  of    a   trial   balance   that   under   ordinary 
circumstances  show  a  debit  balance : 

1.  Cash. 

2.  Bills  Receivable. 

3.  Accounts  Receivable. 

4.  Expense  and  various  subdivisions. 

IV.  The  accounts  of  a  trial  balance  that  under  ordinary  circum- 
stances show  a  credit  balance : 

1.  Investment  accounts. 

2.  Bills  Payable. 

3.  Accounts  Payable. 

V.    Causes  of  errors  in  trial  balances. 

1 .  Mistakes  in  addition :  (a)  in  the  posting  mediums ;  (5)  in 
the  ledger  ;  (c)  on  the  trial  balance. 

2.  Faulty  figures: -(a)  too  large  or  too  small;  (&)  illegible; 
(c)  out  of  column  or  not  properly  spaced. 

3.  Omissions  of  accounts  or  parts  of  accounts  that  are  necessary 
adjuncts  to  the  equality  of  a  double  entry  ledger.     Among  these 
omissions  are :    (a)  the  balance  of   cash  from  the  cash  book ; 
(6)  inventories  from  the  last  closing  of  the  ledger  not  brought 
below  the  rulings ;  (c)  accounts  closed  to  show  balance,  but  the 
balance  not  brought  below  the  ruling. 

4.  Loss  and  gain  items  closed  into  the  Loss  and  Gain  account 
at  the  last  trial  balance,  but  not  ruled  off,  and  so  counted  again 
in  making  the  present  trial  balance. 

5.  Transposition  of  figures. 

6.  Transplacement  of  figures. 

7.  Improper  checking  or  no  checking  at  all  for  the  posting. 

8.  Carelessness  of  any  sort. 

9.  Lack  of  concentration. 

10.  Lack  of  system. 

11.  Omission  of  items  in  posting. 

12.  Posting  to  the  wrong  side  of  accounts. 

13.  Posting  items  twice. 

14.  Neglect  to  fill  out  the  cents  column  for  all  amounts. 

15.  Failure  to  prove  such  books  as  cash  book,  bill  book,  etc., 
before  posting. 


94  TEACHER'S   MANUAL 

EXERCISE  LVII 
HOW  TO   AVOID  ERRORS   IN  TRIAL  BALANCES 

1.  Study  to  gain  a  thorough  knowledge  of  the  fundamental 
principles  of  accounting. 

2.  Work  systematically. 

3.  Learn  to  focus  the  attention. 

4.  Exercise  great  care  in  transferring  amounts  from  one  book 
to  another. 

5.  Verify  all  calculations,  —  additions,  multiplications,  etc. 

6.  Make  good  figures.     Good  figures  should  be  (a)  of  the 
proper  size,  (b)  uniform  in  size,  (c)  properly  spaced. 

7.  Be  self-reliant. 

8.  Be  especially  careful  in  forwarding  amounts  in  sales  books, 
invoice  books,  etc.     If  ledger  accounts  are  forwarded,  be  sure  to 
carry  the  footings  or  balances  to  the  proper  sides  of  the  new 
accounts. 

9.  When  an  account  balances,  immediately  close  it  in  the 
ledger. 

10.  Before  posting  from  a  journal,  examine  the  individual 
entries  in  same  to  determine  that  they  are  in  balance. 

11.  Before  transferring  amounts  from  such  books  as  the  sales 
book,  purchase  book,  etc.,  see  that  every  item  to  be  posted  is 
extended  into  the  proper  column  and  counted  in  determining  the 
total  to  be  carried  to  the  ledger. 

12.  Prove  the  cash  book  before  posting  it  to  the  ledger.     . 

13.  As  far  as  possible  keep  the  books  posted  to  date. 

14.  Trial  balances  are  usually  made  periodically,  —  monthly, 
quarterly,  semiannually,  etc.,  and  at  times  when  the  work  in  the 
countingroom  is  the  heaviest.     At  such  times  the  bookkeeper 
cannot  afford  to  spend  valuable  time  locating  errors.     All  work 
should  be  done  so  thoroughly  from  day  to  day  that  few,  if  any, 
errors  exist.     After  the  records  for  any  period  have  been  trans- 
ferred to  the  ledger,  the  posting  of  every  item  should  be  retraced 
and  checked.     Some  books  are  ruled  with  a  column  for  check 
marks,  in  which  case  these  marks  should  always  be  written  in 


HOW  TO   LOCATE   ERRORS  IN  TRIAL  BALANCES    95 

this  column.  Where  the  column  is  not  provided  for,  place  a 
small  lead-pencil  check  mark  (\J)  on  the  double  line  to  the  left 
of  each  item  examined  in  the  ledger,  and  by  the  side  of  the  folio 
mark  of  each  item  in  the  books  of  original  entry  to  be  posted. 
After  checking  the  items  for  any  period,  examine  the  ledger  to 
see  if  any  errors  are  indicated.  All  items  not  checked  indicate 
errors. 

15.  When  closing  the  ledger  be  sure  to  transfer  the  items  of 
balance,  inventory,  etc.,  to  the  proper  side  below  the  ruling. 

16.  If  a  trial  balance  is  made  of  the  differences  of  the  ledger 
accounts,  great  care  should  be  exercised  to  ascertain  the  correct 
balance  of  each  account. 

17.  Always  fill  out  the  cents  column  in  all  books  of  record. 
If  there  are  no  cents,  either  write  in  ciphers  or  fill  in  the  space 
with  a  waved  line.     This  will  have  a  tendency  to  do  away  with 
the  habit  of  misplacing  even  dollars  or  even  cents. 

18.  Accuracy  in  accounting,  like  accuracy  in  all  departments 
of  activity,  is  a  habit  which  can  be  cultivated  until  it  becomes 
fixed.     The  accountant  who  wishes  to  stand  at  the  head  of  his 
profession  should  give  careful  attention  to  all  those  things  which 
contribute  to  accuracy.     They  not  only  have  a  bearing  upon  his 
special  work,  but  upon  all  else  which  he  may  attempt  along  any 
line. 

EXERCISE    LVIII 
HOW  TO   LOCATE    ERRORS   IN  TRIAL  BALANCES 

The  most  conscientious  and  painstaking  accountant  will  some- 
times make  mistakes  in  his  records.  It  is  therefore  well  to 
suggest  a  system  for  locating  errors  common  to  many  of  those 
engaged  in  the  business  of  accounting. 

An  error  should,  first  of  all,  be  known  to  exist  before  an 
attempt  is  make  to  locate  it.  Be  sure  of  the  additions  on  the 
trial  balance,  and  of  the  proper  transfer  of  the  items  from  the 
ledger  to  the  trial  balance.  If  it  is  palpably  certain  that  an 
error  exists,  proceed  as  follows  to  locate  it : 


96  TEACHER'S   MANUAL 

1.  Determine  the  exact  amount  of  the  error. 

*  a.   If  it  is  a  large  sum,  see  if  the  footings  of  the  sales  book, 
invoice  book,  etc.,  have  been  posted. 

b.  If  it  is  an  amount  similar  to  many  records  in  the  original 
books  of  entry,  carefully  examine  the  individual  amounts  recorded 
in  the  sales  book,  journal,  cash  book,  invoice  book,  etc.,  since  the 
last  trial  balance. 

c.  If  an  amount  equal  to  the  error  is  found,  that  particular  item 
may  have  been  omitted  in  posting  or  may  have  been  posted  twice. 

d.  If  one-half  of  the  amount  is  found,  that  particular  item  may 
have  been  posted  to  the  wrong  side  of  the  ledger. 

2.  Examine  the  transfer  of  the  footings  from  the  ledger  to 
the  trial  balance. 

3.  If  the  amount  of  the  error  is  ten  or  some  power  of  ten, 
look  for  the  error  (a)  in  the  additions  on  the  trial  balance ;  (b)  in 
the  additions  of  the  ledger  accounts ;    (c)  in  the  additions  of  all 
books  the  totals  of  which  are  posted. 

4.  If  the  posting  has  been  checked  as  explained  on  page  95, 
examine  the  ledger  items  to  see  if  there  are  any  amounts  that  are 
not  checked.     If  any  items  are  not  checked,  ascertain  the  cause. 

5.  See  if  the  error  can  be  located  by  experimenting  with  some 
of  the  curious  mathematical  properties  of  9.    All  errors  divisible 
by  9  may  be  caused  by  a  transposition  of  figures.     The  principal 
application  of   the   properties  of   9   in  locating   errors  in  trial 
balances  may  be  referred  to  as  follows: 

a.  If  any  two  consecutive  figures  have  been  transposed,  the 
amount  of  the  error  caused  by  such  transposition  divided  by  9  is 
equal  to  the  difference  between  the  figures  transposed. 

Examples:  $1272.71  written  $1272.17  would  make  an  error 
of  54^.  54  -4-  9  =  6,  or  the  difference  between  the  figures  trans- 
posed. Thus  we  should  look  for  figures  in  the  cents  column 
whose  difference  is  6.  The  following  is  a  complete  list  of  the 
figures  which  may  have  been  transposed  in  the  cents  column  to 
produce  an  error  of  54 : 

17  written  71  and  vice  versa. 
28       "         82     «      "       " 
39       «        93    «      «       « 


HOW  TO  LOCATE   ERRORS   IN  TRIAL   BALANCES    97 

In  each  of  the  foregoing  it  will  be  noted  that  the   difference 
between  the  figures  given  as  possible  transpositions  is  6. 

$731  written  $713  would  make  an  error  of  $18.  18  -*-  9  =  2,  or 
the  difference  between  the  figures  transposed.  Thus  we  should 
look  for  two  consecutive  figures  in  the  units  and  tens  columns 
having  a  difference  of  2.  The  following  is  a  complete  list  of  the 
figures  which  may  have  been  transposed  to  produce  an  error  of  18  : 

13  written  31  and  vice  versa. 

24       "        42    "      "       " 

35       "        53    «      «       « 

46       "        64    "      "       " 

57       "        75    "      "       " 

68       "        86    "      "       " 

79       "        97    "      "       " 

In  each  of  the  above  it  will  be  noted  that  the  difference  between 
the  figures  given  as  possible  transpositions  is  2. 

b.  When  the  amount  of  the  error  caused  by  a  transposition  of 
two  consecutive  figures  has  ciphers  at  the  right,  divide  the  amount 
by  9,  the  same  as  in  (a).     If  there  is  one  cipher  in  the  quotient, 
ignore  it  and  look  for  the  difference  in  the  tens  and  hundreds 
columns ;  if  there  are  two  ciphers  in  the  quotient,  ignore  them  and 
look  for  the  difference  in  the  hundreds  and  thousands  columns,  etc. 

Examples:  $321  written  $231  would  make  an  error  of  $90. 
90  -4-  9  =  10.  Look  for  figures  in  the  tens  and  hundreds  columns 
having  a  difference  of  1.  $3742  written  $7342  would  make  an 
error  of  $3600.  3600  -f-  9  =  400.  Look  for  figures  in  the  hun- 
dreds and  thousands  columns  having  a  difference  of  4. 

c.  If  any  three  consecutive  figures  have  been  transposed,  the 
amount  of  the  error  caused  by  such  transposition  divided  by  99  is 
equal  to  the  difference  between  the  first  and  third  figures  in  the 
number  transposed. 

Examples :  $875  written  $578  would  make  an  error  of  $297. 
297  -f-  99  =  3,  or  the  difference  between  the  first  and  third  figures 
in  the  number  transposed. 

$3657  written  $5637  would  make  an  error  of  $1980.  1980  -f-  99 
=  20.  Ignore  the  cipher  and  2  is  the  difference  between  the  figures 
in  the  thousands  and  tens  columns  which  have  been  transposed. 


98  TEACHER'S   MANUAL 

d.  Figures  which  have  been  transplaced  always  cause  an  error 
that  is  divisible  by  9.  If  an  amount  has  been  transplaced  one 
column  to  the  right  or  to  the  left,  divide  the  difference  by  9  and 
the  quotient  is  the  number  transplaced;  e.g.,  $24  written  $240 
would  make  a  difference  of  $216.  216  -5-  9  =  24,  or  the  number 
transplaced. 

If  an  amount  has  been  transplaced  two  columns  to  the  right  or 
to  the  left,  divide  the  difference  by  99  and  the  quotient  is  the 
number  transplaced  ;  e.g.,  $3.65  written  $365  would  cause  an 
error  of  $361.35.  361.35  +  99  =  3.65,  or  the  number  transplaced. 

If  an  item  has  been  transplaced  three  columns  to  the  right  or  to 
the  left,  divide  the  difference  by  999  and  the  quotient  is  the  number 
transplaced  ;  e.g.,  $4.65  written  $4650  would  make  an  error  of 
$4645.35.  4645.35  -r-  999  =  4.65,  or  the  number  transplaced. 

Thus  when  figures  have  been  transplaced  it  will  be  observed 
that  the  carrying  of  an  amount  one  column  to  the  right  or  to  the 
left  causes  an  error  divisible  by  9 ;  two  places  to  the  right  or  to 
the  left,  an  error  divisible  by  9  or  99 ;  three  places  to  the  right  or 
to  the  left,  an  error  divisible  by  9,  99,  or  999,  etc. 

6.  Should  none  .of  the  above  tests  suggest  the  error,  check  in 
regular  order  all  the  items  that  have  been  posted  since  the  last 
trial  balance  was  completed.     In  doing   this,  watch  closely  to 
determine  whether  in  posting  (a)  any  amounts  have  been  trans- 
posed ;  (6)  any  amounts  have  been  transplaced ;  (c)  any  figure 
or  figures  have  been  omitted  or  substituted. 

7.  After  checking  the  items  from  the  books  of  original  entry 
to  the  ledger,  examine  the  ledger  to  see  that  all  amounts  stand 
checked. 

EXERCISE  LIX 
THE   PAY-ROLL   MEMORANDUM 

SUGGESTIONS.  —  The  teacher  may  supply  amounts  for  a  short  pay 
roll,  and  have  the  class  make  up  a  pay-roll  memorandum.  An  exer- 
cise of  this  kind  may  be  made  very  interesting  and  instructive  as  well. 

Checks  are  sometimes  used  in  paying  off  employees,  but  most 
business  concerns  use  the  envelope  system. 


THE   PAY-KOLL   MEMORANDUM 


99 


A  cash  check  is  usually  drawn  for  the  amount  of  the  pay 
roll,  but  it  is  necessary  that  the  bookkeeper  have  not  only  the 
amount  of  money,  but  the  exact  change  required  to  pay  every 
employee.  In  order  to  do  this  the  bookkeeper  makes  out  a 
pay-roll  memorandum. 

Suppose  we  use  three  names  to  represent  a  pay  roll:  John 
Smith,  $18.27  ;  Alfred  Jones,  $17.20  ;  Austin  Phelps,  $40.67.  To 

pay  Smith  he  would  need 

.    ,.,,          1A         K         0         Outline  for  a  Pay-Roll  Memorandum 
in  bills  one  10,  one  5,  one  2, 

one  1,  and  in  change  one 
25^  and  two  pennies ;  to 
pay  Jones  he  would  need 
one  10,  one  5,  one  2,  and 
two  dimes ;  to  pay  Phelps 
he  would  need  two  20  's, 
one  50<^,  one  dime,  one 
nickel,  and  two  pennies. 
If  the  above  items  were 
arranged  in  columns,  by 
footing  the  columns  he 
would  know  just  the 
total  for  each  denomina- 
tion, and  the  totals  of 
all  the  columns  would 
equal  the  amount  re- 
quired for  the  pay  roll. 
He  would  draw  a  cash 
check,  or  a  check  payable 
to  Pay  Roll,  for  the  total 
amount  required. 

After  securing  the  above  amounts,  the  envelopes  containing 
the  names  or  pay-roll  numbers  of  the  employees,  the  amounts  due 
being  placed  on  the  outside,  are  "filled,"  that  is,  the  required 
sum  is  placed  in  each.  At  the  hour  of  paying  off,  the  employees 
pass  a  stated  place  and  each  receives  his  envelope. 


ffirst 

1  National  £Bank 

WESTFIELD,  MASS. 

£7)             £7>      //       A//                             t 

:zra.i/-3 

NELSON  &  CO. 

require  the  following  : 

Pennies 

....  86 

86 

Nickels 

.     ....  30 

1    50 

Dimes  . 

....  23 

2    30 

Quarters 
Halves  . 
Dollars 

2's   .     . 

....  18 
.     .     .     .  35 

4    50 
17    50 
83 
82 
105 
140 
80 

.     .     .     .83 
....  41 

6's   .     . 

....  21 

10's  .     . 

....  14 

20's  .     . 

4 

516   66 

100  TEACHER'S  MANUAL 

EXERCISE  LX 
ADVANCED  TEST 

1.  Outline  the  fundamental  principles  of  double  entry  book- 
keeping.    Show  clearly  wherein  it  differs  from  single  entry  book- 
keeping. 

2.  In  planning  a  system  of  accounts  for  a  business  what  are  the 
principal  subjects  for  consideration,  and  in  what  order   should 
they  have  attention  ? 

3.  Define  and  show  the  difference  between  :  (a)  sinking  fund 
and  surplus  fund ;  (6)  preferred  stock  and  common  stock. 

4.  Describe  the  nature  of  the  following  accounts :  (a)  suspense ; 
(&)  dividend  ;  (c)  good  will. 

5.  What  are  the  functions  of  a  real  estate  account  ?     What 
entries  may  it  properly  have  on  each  side? 

6.  State  in  the  form  of  journal  entries  the  following  trans- 
actions. 

a.   A  note  of  a  customer  returned  protested  from  the  bank, 
where  it  was  left  for  collection. 

6.  Compromising  with  a  creditor,  receiving  in  full  settlement 
only  fifty  cents  on  the  dollar. 

c.  The  payment  of  your  protested  note,  together  with  interest 
and  protest  fees. 

7.  Formulate,  in  an  imaginary  case,  a  journal  entry  or  entries 
for  changing  a  partnership  to  a  joint  stock  company,  with  the 
same  resources  and  liabilities. 

8.  Describe  a  voucher  record  for  the  expenditures  of  a  corpora- 
tion. 

9.  May  the  good  will  of  a  business  be  sold  ? 

10.  As  bookkeeper  for  a  firm  that  has  no  articles  of  copart- 
nership, what  would  be  your  duty  on  learning  of  the  death  of  a 
partner  ? 

11.  In  a  tabular  outline  show  the  principal  differences  between  : 
(a)  a  partnership  and  a  joint  stock  company;  (b)  a  joint  stock 
company  and  a  corporation. 


ADVANCED  TEST;      ,  101 

12.  In  what  respects  does  a  national  banking  corporation  differ 
from  the  ordinary  corporation  ? 

13.  In  what  respects  is  the  double  entry  system  of  accounting 
preferable  to  the  single  entry  system?     In  changing  from  single 
entry  to  double  entry  what  additional  accounts  are  required  ?     Is 
it  necessary  to  disturb  any  accounts  already  opened  in  the  ledger 
or  to  keep  such  accounts  differently  after  the  change? 

14.  What  should  be  done  on  the  books  of  a  partnership  on  the 
admission  of  a  new  partner  into  the  firm  ? 

15.  State  what  is   meant  by  each   of   the   following   ledger 
accounts  (a)  when  the  account  shows  a  debit  balance,  (&)  when 
the  account  shows  a  credit  balance :  insurance,  rent,  interest,  loss 
and   gain,  merchandise,  accounts   receivable,  accounts   payable. 
Explain  fully. 

16.  In  bookkeeping  why  are  the  debits  on  the  left  and  the 
credits  on  the  right  ? 

17.  Classify  the  following  terms  as  resources  and  liabilities, 
and  give  reasons  in  each  case :  surplus  fund,  sinking  fund,  good 
will,  capital  stock,  treasury  stock,  subscription. 


EXERCISE   LXI 
ADVANCED   TEST 

1.  State  a  comprehensive  general  rule  for  journalizing. 

2.  Explain  the  uses  and  relations  of  the  petty  cash  book  to  the 
principal  cash  book. 

3.  What  difference  in  books  and  accounts  would  exist  between 
a  partnership  and  an  incorporated  company  carrying  on  a  similar 
business  ? 

4.  State  the  scope  and  value  of  the  trial  balance. 

5.  Describe  several  economies  in  accounting  made  possible  by 
the  introduction  of  special  columns  in  books  of  original  entry. 

6.  You  ship  goods  by  freight  and  draw  a  sight  draft  on  the 
purchaser;  how  can  you  keep  control  of  your  goods  until  your 
draft  is  paid  ? 


102  .  TfiACHEK'S   MANUAL 

7.  Enumerate  some  of  the  commercial  advantages  derived  from 
4he  general  use  of  checks  and  other  instruments  of  credit. 

8.  Is  a  credit  system  an  advantage  to  a  community  ?     Explain 
fully. 

9.  Enumerate  some  of  the  advantages  which  a  large  business 
has  over  a  small  one,  and  vice  versa. 

10.  Name  the  various  ways  in  which  a  San  Francisco  merchant 
may  discharge  debts  due  in  (a)  Boston,  (&)  Montreal,  (c)  London. 

11.  Describe  in  detail  all  the  things  that  pass  as  cash. 

12 .  Why  are  drafts  attached  to  bills  of  lading  usually  drawn 
at  sight  or  at  one  day's  sight  ? 

13.  What  are  the  advantages  to  a  business  house  of  making 
its  notes  payable  at  a  bank?     If  there  are  any  disadvantages 
name  them. 

14.  In  the  reports  of  banks  and  other  large  corporations,  large 
sums  of  money  are  classed  as  surplus  fund.     How  and  why  is 
this  fund  formed? 

15.  A  invests  $10,000  in  the  stock  of  a  joint  stock  company 
organized  for  manufacturing  purposes ;  B  invests  $10,000  in  the 
stock  of  a  national  bank ;  C  invests  $10,000  in  a  corporation  formed 
for  manufacturing  purposes ;  D  invests  $10,000  in  an  ordinary 
partnership  business.     All  four  concerns  fail  and  in  each  case  the 
existing  resources  are  but  thirty  cents  on  the  dollar.     What  are 
the  liabilities  of  A,  B,   C,  and  D,  respectively?     What  is  C's 
loss? 

16.  In  the  annual  statement  of  a  street  railway  company  the 
following   items   appear :    unpaid   dividends,    franchise,    sinking 
fund,  surplus  fund,  capital  stock.     Which  are  assets  and  which 
are  liabilities  ? 

17.  You  are  called  upon  to  assume  the  general  duties  of  book- 
keeper in  an  establishment  where  the  accounting  has  been  meager 
and  primitive  ;    state  the  steps  that  you  would  take  to  reform 
existing  conditions. 

18.  A  pays  a  creditor  $1500  to  apply  on  account.     How  has 
the  net  capital  of  his  business  been  affected  ?     He  receives  pay- 
ment for  a  non-interest-bearing  note,  $1700.     Has  his  net  capital 
been  increased  or  diminished,  and  if  so  how  much  ?     He  pays  a 


GENERAL  TEST   QUESTIONS  103 

maturing  note,  $1500,  with  interest,  $150.  In  what  way  has  the 
net  capital  been  affected  ?  Explain  fully. 

19.  Formulate  an  imaginary  entry  to  change  single  entry  books 
to  double  entry. 

20.  Describe  the  uses  and  advantages   of   the  three  distinct 
ledgers  which  are  found  in  many  large  mercantile  houses. 

EXERCISE  LXII 
GENERAL  TEST  QUESTIONS 

1.  Richard  Roe,  Charles  Hall,  and  Harvey  Bates  are  partners 
in  a  retail  hardware  business  with  net  investments  as  follows : 

Richard  Roe  $7296.40 

Charles  Hall  9250.70 

Harvey  Bates  8272.60 

Richard  Roe  retires  from  the  business,  disposing  of  his  interest 
to  Messrs.  Hall  &  Bates  for  $7500,  in  two  notes  of  equal  amounts, 
payable  in  60  days  and  3  months,  respectively.  New  articles  of 
agreement  are  entered  into  between  Charles  Hall  and  Harvey 
Bates  without  additional  investment,  and  the  business  is  carried 
on  substantially  as  before  the  retirement  of  Richard  Roe. 

a.  Make  the  proper  journal  entry  on  the  books  qf  Hall  &  Bates 
for  the  notes  given  to  Roe. 

b.  After  purchasing  Roe's  interest,  what  is  the  capital  stock 
of  Hall  &  Bates? 

2.  J.  B.  Murray  and  J.  E.  Lehman  become  equal  partners  in 
a  dry  goods  business,  each  with  an  investment  of  $4000.     One 
year  later  their  liabilities  exceed  their  resources  by  $2165. 

a.   What  is  the  net  insolvency  of  each  ? 
I.  -What  is  the  total  loss  of  the  firm  ? 

3.  C.  E.  Frey  enters  into  business  January  1  with  resources 
$7000   and   liabilities   $3000.     Three   years   later   he   finds   his 
resources  $3000  and  his  liabilities  $7000. 

a.  What  has  been  his  net  loss  ? 

b.  What  is  his  net  insolvency? 


104  TEACHER'S  MANUAL 

4.  A.  M.  Snow  &  Son  of  Springfield,  Mass.,  draw  a  draft,  pay- 
able one  month  after  date,  on  Henry  Holt  &  Co.,  Boston,  Mass., 
in  favor  of  C.  O.  Loveless,  Lynn,  Mass. 

a.  Presuming  that  the. draft  takes  its  usual  course,  trace  it 
from  the  time  it  leaves  A.  M.  Snow  &  Son  until  it  is  filed  away 
as  a  canceled  bills  payable  by  Henry  Holt  &  Co. 

b.  Why  are  drafts  usually  collected  through  a  bank  instead  of 
direct  ?     Explain  fully. 

5.  A  national  bank  has  a  capital  stock  of  $40Q,000.     J.  H. 
Crandall,  a  depositor,  applies  for  a  loan  of  $45,000. 

Can  the  bank  legally  make  the  loan  ?     Why  ? 

6.  A  buys  a  bill  of  goods  April  6  on  the  following  terms : 
3/10,  net  60  days. 

a.  State  the  last  day  upon  which  payment  may  be  made  and 
discount  claimed. 

b.  If  A  should  not  pay  his  bill  until  June  5,  what  rate  of 
interest  has  he  been  paying  on  the  amount  due  May  6  ?    Analyze 
fully. 

7.  You   have   overdrawn  your  bank  account,  $126.42.     You 
have  $79.26  in  currency,  and  a  check  for  $40.60  on  hand.     The 
cash  receipts  in  the  cash  book  aggregate  $7246.90,  and  the  cash 
payments  $7253.46. 

a.  Make  a  statement,  showing  whether  the  cash  proves  or  not. 

b.  Explain -how  the  overdraft  should  be  shown  in  the  check 
book. 

c.  Draft  a  short  cash  book,  showing  the  above  totals. 

d.  Close  the  cash  book  just  drafted,  using  red  ink,  and  show- 
ing all  necessary  rulings,  etc. 

e.  If  a  business  statement  were  made  at  this  time,  what  would 
the  cash  account  show,  a  resource  or  a  liability  ? 

8.  You  have  made  the  following  errors  in  your  accounting 
during  the  last  month  : 

1.  You  have  entered  $17.90  on  the  debit  side  of  the  Merchan- 
dise account,  and  it  should  have  been  entered  on  the  debit  side 
of  the  Expense  account. 

2.  C.  E.  Randall  should  be  charged  $217.90,  and  you  have 
charged  Armour  Bros,  for  this  amount. 


BANKING   TEST  105 

3.  In  footing  the  credit  side  of  O.  D.  Murray's  account  you  wrote 
the  total  $20  too  small. 

4.  In  footing  the  credit  side  of  Swift  Bros/  account  you  mis- 
took a  "  3  "  for  a  "  5  "  in  the  tens  column. 

a.  If  no  other  errors  have  been  made,  is  the  ledger  in  balance  ? 
Why? 

b.  Will  the  loss  and  gain  statement  show  any  discrepancies  in 
gains  or  losses  ?     Why  ? 

c.  In  real  business  what  is  sure  to  locate  eventually  the  errors 
made  in  personal  accounts  as  above  ? 

EXERCISE  LXIII 
BANKING  TEST 

1.  A  has  overdrawn  his  bank  account,  $64.10.     He  has  on 
hand  in  currency  $11.90   and  a  check  for  $90.42.      Show  the 
entry  and  explanation  necessary  to  close  his  cash  book.     Explain 
in  what  books  of  the  bank  overdrafts  are  recorded. 

2.  How  should  overdrafts  be  indicated  in  the  depositor's  check 
book  ?     In  the  depositor's  pass  book  ? 

3.  Your  check  book  shows  an  overdraft  of  $40.60.    You  make 
a  deposit  of  $50.80.     Explain  how  the  balance  in  the  bank  is 
determined. 

4.  You  make  a  deposit  of  $75  without  your  pass  book.     Are 
you  taking  any  risks  ?     Explain.     You  write  a  check  on  a  blank 
note  taken  from  your  check  book.     Why  should  this  practice  be 
avoided  ? 

5.  Your  pass  book  has  just  been  written  up.    A  certified  check 
is  out.     The  amount  of  this  certified  check  is  shown  in  the  pass 
book.     Will  the  bank  give  you  any  voucher  to  explain  such  pass- 
book record  ? 

NOTE.  —  Should  the  bank  write  up  a  depositor's  pass  book  at  the 
time  when  there  is  a  certified  check  unpaid,  it  will  give  to  the  depositor 
a  charge  ticket  explaining  the  pass-book  record  for  such  check.  The 
usual  form  for  such  a  ticket  is  shown  on  the  next  page. 


106  TEACHER'S   MANUAL 


traders 

ffioston,  ^ALciss.,     $wn&  2,    19- 


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St 


aying 


6.  John  Smith  transfers  a  check  to  you  by  blank  indorsement. 
It  is  then  payable  to  bearer.     Can  you  legally  make  it  payable  to 
your  order  ? 

7.  State  the  advantages  of  a  clearing-house  association  to  the 
banks  of  any  given  city. 

8.  A  is  debtor  to  B.     B  wishes  to  know  the  amount  of  A's 
bank  account.     Would  any  bank  officer  have  the  right  to  give 
out  such  information?     Explain. 

9.  A  bank  retires  $1000  of  its  own  circulating  notes.     Give  the 
proper  entry. 

10.  To  whom  does  (a)  the  surplus  fund  of  a  national  bank 
belong  ?  (&)  undivided  profits  ?  (c)  the  surplus  fund  of  a  savings 
bank? 

11.  Write  a  certificate  of  deposit. 

12.  Are  national  bank  bills  legal  tender? 

13.  Name  the  largest  bank  in  the  world  ;  in  the  United  States. 

14.  Two  shares  of  the  stock  of  Chemical  National  Bank,  New 
York  City,  with  the  par  value  of  $100  each,  were  recently  sold 
for  $6250.     Account  for  the  fact  that  the  stock  of  this  bank  sells 
at  such  enormous  figures. 

15.  Compare  state  and  national  banks.     Contrast  state  and 
national  banks. 


BANKING  TEST  107 

16.  A  check  is  drawn  up  so  that  it  can  be  easily  raised.     It  is 
certified  by  a  bank  and  afterwards  raised.     Can  the  bank  be  held 
for  the  payment  of  the  amount  after  raising? 

17.  Write  the  face  of  a  general  letter  of  credit. 

18.  For  what  purpose  are  notes,  drafts,  etc.,  certified  by  banks  ? 
Explain  fully. 

19.  You  have  a  note  dated  January  31  and  payable  in  one 
month.     Upon  what  date  is  it  due?     If  the  same  note  were  pay- 
able 30  days  after  date,  when  would  it  be  due? 

20.  You  have  a  note  dated  January  29,  payable  in  one  month. 
Upon  what  date  is  it  due  ?    Would  the  extra  day  for  leap  years 
be  taken  into  account  in  your  state  ? 


EXERCISE  LXIV 
BANKING   TEST 

1.  Alliance  National  Bank  is  organized  with  a  capital  stock  of 
$300,000.     The  capital  stock  is  fully  paid  in  at  once,  and  a  surplus 
of  $10,000  is  also  created  and  fully  paid  in.    United  States  bonds 
with  a  par  value  of  $100,000  are  purchased  for  $101,500 ;  circulat- 
ing notes  to  the  extent  of  $100,000  are  received  from  the  Comp- 
troller of  Currency,  duly  signed  and  put  in  circulation.     $5000  is 
forwarded  to  the  Treasurer  of  the  United  States,  as  provided  by 
the  National  Bank  Act,  to  redeem  worn-out  and  mutilated  circu- 
lating notes.     Disbursements,  ordered  by  the  board  of  directors, 
amount  to  $250. 

a.  Give  in  ordinary  journal  form  the  necessary  opening  entries 
for  the  above  transactions. 

b.  What  premium  would  have  to  be  paid  for  the  purchase  of 
2%  gold  bonds  to-day? 

2.  The  above  bank  is  offered  for  discount  a  note  the  face  value 
of  which  is  $32,500. 

Can  it  legally  accept  it  ?  Why  ? 

3.  At  the  end  of  six  months  the  loss  and  gain  accounts  of 
Alliance  National  Bank  show  the  following  balances. 


108  TEACHER'S   MANUAL 

Dr. 

Expense 

Salaries  5100. 

Furniture  and  Fixtures  4100. 

Keal  Estate  18000. 

Taxes  500. 

United  States  Bonds  100000. 

Stocks  and  Bonds  15900. 

Cr. 

Interest  and  Discount  $21500. 

Collection  and  Exchange  11650. 

The  above  loss  and  gain  accounts  are  inventoried  as  follows : 
Keal  Estate  $18500. 

Furniture  and  Fixtures  3900. 

United  States  Bonds  100000. 

Stocks  and  Bonds  17000. 

Interest  and  Discount  1000. 

a.  Make  a  journal  entry  to  take  the  gains  out  of  the  several 
gain  accounts  and  carry  them  to  the  Loss  and  Gain  account. 

b.  Make  an  entry  to  take  the  losses  out  of  the  several  loss 
accounts  and  carry  them  to  the  Loss  and  Gain  account. 

c.  Make  an  entry  to  close  the  Loss  and  Gain  account,  dividing 
the  net  gain  as  follows  :    To  Dividend  account,  4%  of  the  capital 
stock ;   to  Surplus  Fund,  10  %  of   the  net  gain ;   to  Undivided 
Profits,  the  balance  of  the  net  gain. 

4.  What  account  in  the  general  ledger  of  the  bank  should  be 
referred  to  (a)  in  proving  the  discount  tickler?  (5)  in  proving 
the   individual   ledger?    (c)  in   proving   the   out-of-town   banks 
ledger? 

5.  If  Alliance  National  Bank  is  organized  in  a  city  with  a 
population  of  17,000,  what  is  the  minimum  capital  stock  required  ? 

6.  A  has  a  balance  of  $3651  to  his  credit  at  Alliance  National 
Bank,  and  he  presents  a  check  of  $3500  for  certification. 

Can  the  bank  legally  certify  the  check?     Why? 

7.  On  what  conditions  can  a  national  bank  hold  real  estate  ? 


CIVIL   SERVICE   TEST  109 

8.  Tell  which  of  the  following  accounts  show  resources  and 
which  liabilities :  surplus  fund,  undivided  profits,  dividends,  bills 
discounted,  deposits,  circulation. 

EXERCISE    LXV 
CIVIL   SERVICE   TEST 

The  following  is  a  good  illustration  of  the  kind  of  examinations 
given  by  the  United  States  Civil  Service  Commission. 

An  expense  account  has  three  debits  as  follows :  January  16, 
$80  ;  January  23,  $165  ;  and  February  10,  $66.  There  is  an 
unpaid  bill  of  $63  that  belongs  to  it.  Represent  the  account  on 
a  ledger  and  close  it. 

Represent  a  merchandise  account  of  six  items  and  an  inventory, 
and  close  it. 

Smith,  Jones  &  Brown  are  engaged  in  a  manufacturing  business, 
and  have  decided  to  form  a  stock  company,  with  a  capital  of 
$50,000.  Each  partner  is  to  take  stock  for  his  net  investment  in 
the  business,  and  the  remainder  of  the  stock  is  to  be  subscribed  by 
other  parties.  Capital  stock  is  to  be  credited  with  the  full  amount 
of  authorized  capital. 

A  trial  balance  of  the  ledger  shows  the  following  : 

Dr.  Cr. 

Real  Estate  $10000.        Smith  $16000. 

Machinery  12000.        Jones  10000. 

Merchandise  10000.        Brown  8000. 

Material  5000.         Bills  Payable  7000. 

Cash  5000.        Personal  Accounts  6000. 

Bills  Receivable  2000. 

Personal  Accounts  3000.  

$47,000.  $47,000. 

From  the  above  statement  and  conditions,  accepting  resources  at 
face  value  as  per  above  balances,  and  assuming  the  liabilities  of 
the  old  firm,  what  journal  or  cash-book  entries  are  necessary  to 
open  a  new  set  of  books  for  the  company  ? 


110  TEACHER'S   MANUAL      . 

EXERCISE  LXVI 
GENERAL  TEST 

1.  M.  D.  Shepard  &  Co.  have  resources  and  liabilities  as  follows : 

Resources 

Real  Estate  $50,000. 

Plant  and  Machinery  75,000. 

Accounts  Receivable  36,000. 

Finished  Products  42,000. 

Liabilities 
Bills  Payable  $16,000. 

The  firm  disposes  of  its  entire  resources  and  liabilities  to  a 
joint  stock  company  for  stocks  and  bonds  as  follows  : 

Bonds  $75,000. 

Preferred  Stock  75,000. 

Common  Stock  60,000. 

Make  the  necessary  entry  on  the  books  of  the  joint  stock  com- 
pany for  the  purchase  of  the  business  of  M.  D.  Shepard  &  Co. 

2.  From  the  following  trial  balance  of  the  Union  Whip  Co. 
make  (a)  statement  of  losses  and  gains ;  (&)  statement  of  resources 
and  liabilities : 

December  31,  19— 

Dr.  Cr. 

Capital  Stock  $54000. 

Real  Estate  $13227. 

Machinery  and  Tools  12500. 

Cash  3750. 

Sundry  Expenses  750. 

Bills  Receivable  6000. 

Gas  and  Water  250. 

Taxes  250. 

Freight  and  Drayage  350. 

Office  Expenses  450. 


GENERAL  TEST  111 


Merchandise 

Salaries  1200. 

Insurance  200. 

Printing  and  Advertising  200. 

Traveling  Expenses  1250. 

Agents'  Salaries  950. 

Labor  3400. 

Whalebone  1140. 

Rawhide  720. 

Reeds  and  Rattan  120. 

Thread  72. 

Butts  460. 

Accounts  Receivable  15000. 

Accounts  Payable  $6000. 

Bills  Payable  4000. 

Repairs  90. 

Loss  and  Gain  1009. 

The  inventories  are  as  follows : 

Real  Estate  $13000. 

Machinery  and  Tools  12000. 

Freight  and  Drayage  (liability)  350. 

Merchandise  17640.90 

Insurance  90. 

Traveling  Expenses  75. 

Agents'  Salaries  (liability)  120. 

Whalebone  720. 

Rawhide  240. 

Reeds  and  Rattan  90. 

Thread  50. 

Butts  390. 

Open  the  accounts  in  ledger  form,  and  (a)  close  the  classified 
expense  accounts  into  Sundry  Expenses,  (&)  the  classified  mer- 
chandise accounts  into  Merchandise,  (c)  Merchandise  into  Loss 
and  Gain. 


112  TEACHER'S   MANUAL 

Make  a  journal  entry  to  close  the  Loss  and  Gain  account. 
Dividends,  3%  of  the  capital  stock;  surplus  fund,  5%  of  the  net 
profits ;  undivided  profits,  the  remainder  of  the  net  gain. 
,  3.  Reardon  &  Radcliffc'e  of  Boston  owe  D.  O.  Frey  of  Spring- 
field $721.62,  and  Raymond  Bros,  of  Albany  owe  Reardon  & 
Radcliffe  $1275.  January  6  Reardon  &  Radcliffc'e  draw  a  sight 
draft  on  Raymond  Bros.,  in  favor  of  D.  O.  Frey.  They  mail  the 
draft  to  Frey,  who  immediately  upon  its  receipt  deposit  it  in 
Union  National  Bank  of  Springfield.  Union  .National  Bank 
sends  the  draft  to  Central  National  Bank,  Albany.  On  presen- 
tation, January  9,  Raymond  Bros,  accept  the  draft,  payable  at 
City  Bank,  Albany.  It  then  goes  through  the  clearing  house 
at  Albany,  is  received  by  City  Bank,  charged  to  the  account  of 
Raymond  Bros.,  and  returned  to  them  when  their  pass  book  is 
written  up. 

a.    Show  both  sides  of  the  draft  as  it  appears  after  payment. 

6.  Give  the  entries  recording  the  transaction  in  the  books  of 
the  drawer,  drawee,  and  payee. 

4.  J.  E.  Farley,  C.  N.  Sperry,  and  F.  E.  Raines  are  equal 
partners  in  a  wholesale  clothing  business  under  the  firm  name  of 
J.  E.  Farley  &  Co.  August  1  their  stock  of  clothing,  fixtures, 
etc.,  is  destroyed  by  fire.  A  trial  balance  which  was  locked  up 
in  their  fire-proof  safe  shows  the  following  condition  of  the 
accounts  of  the  business  July  31 : 

Dr.  Cr. 

J.  E.  Farley  $5200. 

C.  N.  Sperry  5150. 

F.  E.  Raines  5165. 

Cash  $3610. 

Furniture  and  Fixtures  1500. 

Merchandise  12100. 

Bills  Receivable  900. 

Bills  Payable  2845. 

Accounts  Receivable  4750. 

Accounts  Payable  4620. 

Interest  120. 


GENERAL   TEST  113 

The  stock  of  clothing  and  the  fixtures  are  covered  by  insurance, 
and  the  insurance  company  makes  payment  as  follows  : 
For  Stock  $15210. 

For  Fixtures  1100. 

On  the  basis  of  the  above  figures  prepare  (a)  a  statement  of 
losses  and  gains ;  (&)  a  statement  of  resources  and  liabilities. 

EXERCISE  LXVII 
GENERAL   TEST 

1.    The    following    are    the    single-entry    ledger   accounts   of 
Demerest  &  Co. : 

Dr.  Cr. 

C.  M.  Demerest  (proprietor)  $23400. 

F.  E.  Dunkle  (proprietor)  20300. 

O.  M.  Powers  &  Co.  7000. 

E.  W.  Hasten  $2500. 

C.  W.  Delaney  2500. 

Warren  &  Frey  1500. 

E.  O.  Breezee  800. 

L.  M.  Berriman  1000. 

The  following  are  the  resources  and  liabilities  not  shown  in 
the  ledger: 

Resources 

Merchandise,  as  per  inventory  $36000. 
Notes,  in  favor  of  Demerest  &  Co.,  as  per  bill  book      31800. 

Cash  in  Bank  14000. 

Office  Furniture  3100. 

Fuel  25. 

Real  Estate  7500. 
Liabilities 

Notes  issued  by  Demerest  &  Co.  $38000. 

Unpaid  freight  bill  490. 

Unpaid  telephone  bill  120. 


114  TEACHER'S   MANUAL 

The  partners  share  the  profits  and  bear  the  losses  in  equal 
proportions. 

a.  Make  a  statement,  showing  the  condition  of  the  business 
and  the  net  gain  or  loss  of  each  partner. 

1.  Make  an  entry  by  single  entry  to  carry  the  proper  share  of 
the  net  gain  or  net  loss  to  each  partner's  account. 

c.  Make  a  journal  entry  to  change  the  single-entry  books  to 
double  entry. 

d.  Make  a  trial  balance,  showing  the  ledger  accounts  after  the 
books  have  been  changed  to  double  entry. 

2.  A  corporation  with  a  capital  stock  of  $200,000  is  about  to 
declare  dividends.     The  net  gain  since  the  last  dividend  period  is 
$21,792.50.     The  stockholders  agree  upon  the  following  distribu- 
tion of  profits :  To  Dividend  account,  6%  of  the  capital  stock ;  to 
Surplus  Fund,  $7000 ;  to  Undivided  Profits,  the  balance  of  the 
net  gain. 

All  of  the  loss  and  gain  accounts  have  been  closed.  Make  a 
journal  entry  to  close  the  Loss  and  Gain  account. 

3.  Messrs.  Raymond  &  Co.  are  partners  in  a  jobbing  furniture 
business,  sharing  gains  and  losses  equally.     A  trial  balance  of 
their  business  at  the  close  of  the  fiscal  year  shows  the  following 
debits  and  credits : 

Dr.  Cr. 

W.  D.  Raymond,  investment  $8405.26 

C.  E.  Reardon,  investment  8405.26 

Cash  $9017.32 

Merchandise  3424.89 

Bills  Receivable  12000. 

Bills  Payable  8350. 

Expense  576. 

Interest  and  Discount  129.75 

Merchandise  Discounts  250. 

Accounts  Receivable  3566. 

Accounts  Payable  3803.44 

$28963.96  $28963.96 


GENERAL   TEST  115 

The  inventories  are  as  follows : 
Merchandise  (resource) 

Goods  on  hand  $8000. 

Merchandise  (liability) 

Unpaid  freight  biU  179.70 

Expense  (resource) 

Fuel  on  hand  100. 

Expense  (liability) 

Unpaid  gas  bill  $15.60 

Unpaid  telephone  service  20.40  36. 

A  personal  account  receivable  for  $790.40  is  known  not  to  be 
worth  more  than  25^  on  the  dollar. 

a.  Make  a  statement  of  resources  and  liabilities. 

b.  Make  a  statement  of  losses  and  gains. 

4.  A  partnership  contract  between  A  and  B  provides  that  each 
partner  shall  contribute  $15,000  to  a  new  business,  and  that  on 
any  capital  brought  in  by  either  partner  in  excess  of  this  amount, 
he  shall  receive  interest  at  the  rate  of  6%.     One  month  later  A 
contributes  $7500,  and  the  bookkeeper  makes  .an  entry  in  the 
books  at  the  end  of  the  year,  crediting  A  $450  and  debiting  B 
$450.     Is  this  the  correct  entry  to  adjust  the  interest  account? 
Give  reasons. 

5.  A,  B,  and  C  unite  as  partners  to  carry  on  business  with  a 
capital  of  $60,000,  of  which  A's  share  is  $30,000;  B's,  $20,000; 
and  C's,  $10,000.     By  the  articles  of  agreement  each  partner  is 
entitled  to  receive  interest  on  his  capital  at  the  rate  of  6%  per 
annum,  and  to  share  the  profits  and  losses  in  the  following  pro- 
portions :  A  TV,  B  J,  C  J.     Three  months  later  A  drew  out  $1000 
and  B  $500.     Six  months  later  C  drew  out  $750.     One  year  after 
the  formation  of  the  partnership  a  journal  entry  is  made  to  adjust 
the  interest  account,  preparatory  to  making  financial  statements 
and  closing  the  ledger.    Formulate  the  entry  to  adjust  the  interest 
between  the  partners. 


116 


TEACHER'S   MANUAL 


EXERCISE  LXVIII 
EXTENDING  BALANCES   IN  THE   INDIVIDUAL  LEDGER 

It  is  possible  to  extend  the  balances  in  the  individual  ledger 
mentally  with  accuracy  and  rapidity.  The  explanations  following 
are  based  upon  the  general  principle  that  to  subtract  one  digit 
from  another  the  result  may  be  accomplished  by  deducting  the 
subtrahend  from  10,  adding  the  remainder  to  the  minuend,  and 
subtracting  10  from  the  sum;  thus,  9  —  5  =  10  —5  +  9  —  10,  or  4. 
Applying  this  principle  to  the  amounts  on  an  individual  ledger, 
we  may  proceed  to  extend  the  balance  of  the  following  account 
mentally : 


BALANCE 

CHECKS  IN  DETAIL 

TOTAL  CHECKS 

DEPOSITS 

BALANCE 

R.  Roe 

1465 

200 

540 

621 

340 

The  first  figure  in  the  Deposits  column  is  1 ;  to  this  add  10, 
the  difference  between -the  first  figure  in  the  Total  Checks  column 
and  10 ;  to  this  sum  add  5,  the  first  figure  in  the  Balance  col- 
umn. The- result  is  16.  Deducting  10,  we  write  6  in  the  Balance 
column.  The  second  figure  in  the  Deposits  column  is  2 ;  to  this  add 
6  (10  —  4) ;  and  to  this  sum  add  6 ;  deducting  10,  we  write  4  in  the 
Balance  column.  The  third  figure  in  the  Deposits  column  is  6 ;  to 
this  add  5  (10  —  5) ;  and  to  this  sum  add  14 ;  deducting  10  from 
the  last  sum,  we  have  15,  which  we  write  in  the  Balance  column. 
The  new  balance  of  the  account  is  therefore  $1546. 


BALANCE 

CHECKS  IN  DETAIL 

TOTAL  CHECKS 

DEPOSITS 

BALANCE 

J.  Doe 

6128 

1161 

1261 

1299 

100 

EXTENDING  INDIVIDUAL-LEDGER  BALANCES     117 


We  may  extend  the  balance  of  the  foregoing  account  in  prac- 
tically the  same  manner  as  explained  on  page  116.  9  +  9  (10  — 
1)  +  8  =  26.  Deducting  10,  we  have  6  to  write  in  the  Balance 
column  and  1  to  carry.  1  +  9  +  4  (10  -  6)  +  2  =  16.  Deducting 
10,  we  have  6  to  write  in  the  Balance  column*  2  +  8  (10  —  2)  + 
1  =  11.  Deducting  10,  we  have  1  to  write  in  the  Balance  column. 
1  +  9  (10  -  1)  +  6  =  16.  Deducting  10,  we  have  6  to  write  in  the 
Balance  column.  The  new  balance  of  the  account  is  therefore- 
$6166. 


BALANCE 

CHECKS  IN  DETAIL 

TOTAL  CHECKS 

DEPOSITS 

BALANCE 

E.  King 

5160 

1249 
100 

1349 

1111 

The  balance  of  the  above  account  may  be  extended  practically  the 
same  as  in  the  other  two  accounts.  1  +  1  +  0  =  2.  Write  2  in  the 
Balance  column.  Since  10  cannot  be  deducted  from  2,  we  deduct 
10  from  11,  or  the  first  two  figures  in  the  Deposits  column.  We 
then  proceed  to  add  as  usual ;  thus,  0  +  6+6  =  12.  Write  2  in  the 
Balance  column.  1+7  +  1  =  9.  Write  9  in  the  Balance  column, 
and  deduct  10  from  the  third  and  fourth  figures  in  the  Deposits 
column.  Then  proceed  to  add  as  usual ;  thus,  0  +  9+5  =  1 4. 
Deducting  10,  we  have  4  to  write  in  the  Balance  column.  The 
new  balance  is  therefore  $4922. 

From  the  above  explanation  the  following  rule  may  be  deduced : 

Add  the  digits  in  the  Deposits  column  to  the  difference  between  the 
digits  in  the  Total  Checks  column  and  10,  and  add  to  the  sum  obtained 
the  digits  of  the  old  balance.  The  result  thus  obtained  will  be  the  new 
balance. 

In  the  account  of  R.  Roe  it  will  be  noticed  that  when  the  sum 
to  be  written  in  the  Balance  column  is  more  than  10  and  less 
than  20,  there  is  nothing  to  carry.  In  the  account  of  J.  Doe  it 
will  be  noticed  jthat  where  the  sum  to  be  written  in  the  new 
Balance  column  is  20  or  more  (the  sum  of  any  three  digits  can 
never  be  more  than  27)  there  is  always  one  to  carry. 


118 


TEACHER'S   MANUAL 


From  the  account  with  E.  King  it  will  be  noticed  that  where 
the  sum  to  be  written  in  the  new  Balance  column  is  less  than  10, 
there  is  nothing  to  carry,  and  1  should  be  deducted  from  the  next 
figure  in  the  Deposits  column. 

Exercises  for  Practice.  —  Dictate  the  following  amounts  and 
request  that  the  new  balances  be  extended  mentally : 


BALANCE 

CHECKS  IN  DETAIL 

TOTAL  CHECKS 

DEPOSITS 

BALANCE 

M.  Hart 

2430 

100 

550 

432 

320 

130 

G.Wild 

1050 

436 

1204 

3300 

768 

J.  Lord 

432 

153 

353 

221 

100 

400 

100 

S.  Gray 

5830 

98 

248 

110 

150 

K.  Long 

5325 

118 

843 

8670 

25 

700 

O.  Gay 

125 

360 

524 

235 

M.  Oaks 

1000 

150 

650 

500 

500 

2000 

T.  Mann 

4415 

300 

590 

1115 

15 

275 

H.  Dunn 

541 

100 

100 

590 

R.  Neal 

2215 

210 

658 

365 

448 

A.  Cook 

8100 

35 

112 

385 

77 

K.  Roy 

449 

140 

259 

200 

119 

160 

8635 


YB   18635 


.SITY  OF  CALIFORNIA  LIBRARY 


